Asia’s equity capital market has burst back into life, after a relatively fallow year-to-date, but structural challenges – such as whether Hong Kong’s bourse is truly global – remain. Potential blockbuster deals such as an Alibaba IPO are cheering ECM bankers but it should not obscure the bigger IPO picture.
Cameron is not alone in trying to woo Alibaba. ECM bankers in Hong Kong, New York and London are all hoping the listing eventually happens in their respective home market, giving them a slice of an IPO fee pool likely to be the worlds largest since Facebook.
Jack Ma, CEO Alibaba
However, the Alibaba IPO, while providing interesting sport and an opportunity to stress the relative virtues of several global listing venues, is only part of the story in Asia-Pacific. Indeed it seems that bankers might be putting too much emphasis on Alibaba. They should be careful not to miss the abundant opportunity elsewhere as a result.
The pipeline for IPOs is now full to the point of bursting; the months ahead promise much.
Rupert Mitchell, head of Asia Pacific equity syndicate at Citi, says: Now the market is wide open. There are some good deals that have gone very well. Trades are being printed, although people remain mindful of liquidity.
Matt Hanning, head of investment banking at UBS in Asia-Pacific, points out that the focus of the IPO market in the region has recently moved back to Hong Kong and China, having earlier in the year settled on other parts of the region and in particular in Asean member states.
The sentiment has shifted back to north Asia, he says.
Indeed, several banks bolstered their teams in southeast Asia earlier this year as they predicted a boom in IPOs. However, it has not come to fruition.
Part of this shift in focus comes as bankers respond to the prospect provided by the recent third plenum in China of greater clarity on the direction of Chinese economic, fiscal and capital markets policy.
Policy matters have been driving activity or lack thereof for some time, with hopes of a rebound in sentiment earlier this year being dashed on May 22 when Federal Reserve chairman Ben Bernanke began making comments about tapering money stimulus that spooked investors in Asia, introducing further volatility to markets already worried about a slowdown in growth in China and India.
Although the activity will cheer bankers in the region, some are concerned it does not address Hong Kongs fundamental problem as a global financial centre: that business conducted there is not nearly global enough.