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Tuesday 13 October 2009
Demand for IPOs in Asia still strong
Demand for public stock offerings in Hong Kong and throughout the region remains strong, despite a few recent deals that struggled, according to a panel of three investment bankers and one hedge fund investor.
A lot of growth capital is sitting in China right now
Reuters 13 October 2009
(HONG KONG) Demand for public stock offerings in Hong Kong and throughout the region remains strong, despite a few recent deals that struggled, according to a panel of three investment bankers and one hedge fund investor.
‘The fact is liquidity remains incredibly strong,’ said Steven Barg, head of Global Markets, Asia, for UBS AG. ‘As long as you have a solid company, differentiated from what’s out there in the secondary market today, the IPO market and the follow on market is still available.’ Mr. Barg was joined by Liang Meng, managing director at hedge fund D E Shaw, Chris Gammons, head of Citigroup’s Asia Pacific Financial Entrepreneurs Group, and Scott Matlock, Asia M&A chairman for Morgan Stanley.
The panel assembled for an exclusive Thomson Reuters event late last week.
Mr. Gammons said a lot of growth capital is sitting in China right now, at companies where investors decided to hold off on cashing-out late last year during the height of the financial crisis. The time is right for some of these companies to hit the public markets.
‘For some of the names, in retail and consumer - again, with a China bent - there is demand there. These are investments where US$30 million turns into 3X,’ Mr. Gammons said, referring to an investor making three times their money. Now is a good time to achieve that kind of internal rate of return, he said.
‘With M&A activity being a bit slower, the public markets are allowing monetisations that otherwise could have been done somewhere else,’ he said.
Asia equity and equity-linked volume surged in September, with US$21 billion worth of deals, Thomson Reuters data show, compared to around US$2 billion a year earlier.
In the past few weeks, however, several Hong Kong IPOs have been battered after listing, causing some in the market to think that the burst of deals had caused investor indigestion and that the public offering window was closing.
Mr. Barg said technical reasons and over-supply played a role in some of the disappointing debuts. Investor interest in the half-dozen property IPOs in the market depends on a fund’s time horizon, he said.
But there are plenty of investors with less outside pressure willing to invest in solid companies in the region, according to Mr. Barg.
Shares of Chinese property developer Glorious Property Holdings fell 18 per cent in their Hong Kong debut on Oct 2. The company raised US$1.28 billion through its IPO.
‘The last 12 to 18 months taught a lot of PRC (Chinese) companies a good lesson,’ Mr. Liang said. ‘Markets do open and shut very abruptly. We told our companies to be ready when the window is open.’
‘Private equity firms, in general, are actually quite good about being balanced at where to price things because they know they’re going to be doing this for 10, 20, 30 years,’ Morgan Stanley’s Mr. Matlock said.
Mr. Matlock mentioned the view of private equity investors as the ‘guys who will take every last dollar in every trade they make.’ ‘I just don’t think that’s the case. I think they actually are quite balanced at how they price things because they want people to make money off their deals,’ he said.
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Demand for IPOs in Asia still strong
A lot of growth capital is sitting in China right now
Reuters
13 October 2009
(HONG KONG) Demand for public stock offerings in Hong Kong and throughout the region remains strong, despite a few recent deals that struggled, according to a panel of three investment bankers and one hedge fund investor.
‘The fact is liquidity remains incredibly strong,’ said Steven Barg, head of Global Markets, Asia, for UBS AG. ‘As long as you have a solid company, differentiated from what’s out there in the secondary market today, the IPO market and the follow on market is still available.’ Mr. Barg was joined by Liang Meng, managing director at hedge fund D E Shaw, Chris Gammons, head of Citigroup’s Asia Pacific Financial Entrepreneurs Group, and Scott Matlock, Asia M&A chairman for Morgan Stanley.
The panel assembled for an exclusive Thomson Reuters event late last week.
Mr. Gammons said a lot of growth capital is sitting in China right now, at companies where investors decided to hold off on cashing-out late last year during the height of the financial crisis. The time is right for some of these companies to hit the public markets.
‘For some of the names, in retail and consumer - again, with a China bent - there is demand there. These are investments where US$30 million turns into 3X,’ Mr. Gammons said, referring to an investor making three times their money. Now is a good time to achieve that kind of internal rate of return, he said.
‘With M&A activity being a bit slower, the public markets are allowing monetisations that otherwise could have been done somewhere else,’ he said.
Asia equity and equity-linked volume surged in September, with US$21 billion worth of deals, Thomson Reuters data show, compared to around US$2 billion a year earlier.
In the past few weeks, however, several Hong Kong IPOs have been battered after listing, causing some in the market to think that the burst of deals had caused investor indigestion and that the public offering window was closing.
Mr. Barg said technical reasons and over-supply played a role in some of the disappointing debuts. Investor interest in the half-dozen property IPOs in the market depends on a fund’s time horizon, he said.
But there are plenty of investors with less outside pressure willing to invest in solid companies in the region, according to Mr. Barg.
Shares of Chinese property developer Glorious Property Holdings fell 18 per cent in their Hong Kong debut on Oct 2. The company raised US$1.28 billion through its IPO.
‘The last 12 to 18 months taught a lot of PRC (Chinese) companies a good lesson,’ Mr. Liang said. ‘Markets do open and shut very abruptly. We told our companies to be ready when the window is open.’
‘Private equity firms, in general, are actually quite good about being balanced at where to price things because they know they’re going to be doing this for 10, 20, 30 years,’ Morgan Stanley’s Mr. Matlock said.
Mr. Matlock mentioned the view of private equity investors as the ‘guys who will take every last dollar in every trade they make.’ ‘I just don’t think that’s the case. I think they actually are quite balanced at how they price things because they want people to make money off their deals,’ he said.
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