Hushed IPO Scene Expected Over the Next Six Months
This follows a 77.2% plunge in IPO funds raised last year to US$1.21b from US$5.3b a year earlier.
By Jamie Lee 3 January 2009
The IPO market was wrung dry in 2008 and with the Champagne bottle having just been popped for the New Year, recovery is still seen no closer than six months later, players say.
This comes as analysts expect a final burst of redemptions by hedge funds - depressing markets further - and as governments worldwide continue to work to salvage the economic situation through fiscal stimulus packages.
The credit crunch also means sustainable rallies in equity markets will only be seen when credit growth resumes, rather than just after the current de-leveraging, Merrill Lynch said in a report dated Dec 9, 2008. ‘A rally is more likely to occur when re-leveraging begins,’ the report said.
Last year, the Singapore Exchange (SGX) saw the lowest number of IPO listings since 2003. There were just 30 IPOs (initial public offerings) in 2008, compared with 61 in 2007, according to Bloomberg data.
Ten companies, including Zhenzhong Auto and Maritime Capital, deferred or cancelled planned IPOs last year. And total IPO funds raised plunged 77.2 per cent to US$1.21 billion from US$5.3 billion in 2007.
Just two of the 30 companies that did list - China Fibretech and China Kunda Technology - have stayed above the water to trade higher than their IPO levels.
China Fibretech, which listed in June at an IPO price of 21 cents, closed at 22.5 cents yesterday, while China Kunda Technology last traded at 22 cents, half a cent higher than its IPO price of 21.5 cents.
The biggest loser is Indonesia’s Samko Timber, which has shed 88 per cent of its value since its listing, dropping to a dismal 6.5 cents from its IPO price of 55 cents. Not far behind is Indiabulls Property Trust, which has slumped 74 per cent since its IPO in June. It last traded at 26 cents, trailing its IPO price of $1.
Li Heng Chemical Fibre Technologies - the biggest IPO in 2008 at US$228 million - has lost 65 per cent since its listing. It closed yesterday at 28 cents against its IPO price of 80 cents.
The IPO market suffered a similar contraction during the Asian financial crisis - deal size shrank 74.4 per cent to US$215 million in 1998 from US$841 million the year before, according to figures from Dealogic. And the number of listings fell by almost half to 18, from 32.
The main difference now is that following SGX’s pursuit of overseas listings, deal origins in 2008 involved a bigger mix of nationalities, with 11 of the top 20 deals this year coming from China.
In contrast, all top 20 listings in 1998 were Singapore companies, according to Dealogic. But with global markets languishing, the situation here in 2009 is likely to be worse than that during the Asian financial crisis, said a senior IPO banker with a Singapore brokerage.
‘The financial crisis was only an Asian problem,’ he told BT. ‘The rest of the world was still doing well, and that’s why we were able to resuscitate ourselves.’ Still, he expects to see a recovery in equity markets in the fourth quarter of 2009.
‘We are going into a situation that is unprecedented worldwide,’ he said. ‘America is so drunk with debt that the only thing it can do is fire up the printing press. The smaller (deals) we can push out, by the grace of God.’
Perceived poor economic conditions ahead have driven some investors away because would-be listings find it hard to offer a rosy business outlook, said Daiwa Securities executive vice-president Tay Kok Soon.
‘Investors are forward looking. You’ve done well for the past three years, but what’s going to happen in 2009?’ said Mr. Tay, noting that a pick-up could come at the end of Q2.
‘This will affect the attractiveness of any company that is thinking of an IPO’ because it puts pressure on the price-earnings multiple.
On average, IPO bankers could be proposing historic PEs of two to three times, ‘but the owners of companies may not bite’, said Mr. Tay, especially those not in urgent need of funds.
With the hushed IPO market, Stirling Coleman Capital is looking for merger and acquisition (M&A) deals instead, said CEO Ang Kay Tiong.
‘We’ll focus on M&A,’ he told BT, adding that sellers are lowering their price expectations given the grim outlook.
‘The gap between buyer and seller has narrowed,’ he said. ‘Last year, sellers tended to ask a much higher price, whereas this year, I guess they are more realistic.’ But he cautioned that M&A deals are lumpy and will take some time to close.
‘Those with cash are shopping around but they are not in a hurry,’ he said. ‘And mega deals are out because the banks are not lending.’
Because China is the one bright economic spark globally, buyers are looking at companies in the consumables sector to buy some exposure to China at a lower price now, he noted.
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Hushed IPO Scene Expected Over the Next Six Months
This follows a 77.2% plunge in IPO funds raised last year to US$1.21b from US$5.3b a year earlier.
By Jamie Lee
3 January 2009
The IPO market was wrung dry in 2008 and with the Champagne bottle having just been popped for the New Year, recovery is still seen no closer than six months later, players say.
This comes as analysts expect a final burst of redemptions by hedge funds - depressing markets further - and as governments worldwide continue to work to salvage the economic situation through fiscal stimulus packages.
The credit crunch also means sustainable rallies in equity markets will only be seen when credit growth resumes, rather than just after the current de-leveraging, Merrill Lynch said in a report dated Dec 9, 2008. ‘A rally is more likely to occur when re-leveraging begins,’ the report said.
Last year, the Singapore Exchange (SGX) saw the lowest number of IPO listings since 2003. There were just 30 IPOs (initial public offerings) in 2008, compared with 61 in 2007, according to Bloomberg data.
Ten companies, including Zhenzhong Auto and Maritime Capital, deferred or cancelled planned IPOs last year. And total IPO funds raised plunged 77.2 per cent to US$1.21 billion from US$5.3 billion in 2007.
Just two of the 30 companies that did list - China Fibretech and China Kunda Technology - have stayed above the water to trade higher than their IPO levels.
China Fibretech, which listed in June at an IPO price of 21 cents, closed at 22.5 cents yesterday, while China Kunda Technology last traded at 22 cents, half a cent higher than its IPO price of 21.5 cents.
The biggest loser is Indonesia’s Samko Timber, which has shed 88 per cent of its value since its listing, dropping to a dismal 6.5 cents from its IPO price of 55 cents. Not far behind is Indiabulls Property Trust, which has slumped 74 per cent since its IPO in June. It last traded at 26 cents, trailing its IPO price of $1.
Li Heng Chemical Fibre Technologies - the biggest IPO in 2008 at US$228 million - has lost 65 per cent since its listing. It closed yesterday at 28 cents against its IPO price of 80 cents.
The IPO market suffered a similar contraction during the Asian financial crisis - deal size shrank 74.4 per cent to US$215 million in 1998 from US$841 million the year before, according to figures from Dealogic. And the number of listings fell by almost half to 18, from 32.
The main difference now is that following SGX’s pursuit of overseas listings, deal origins in 2008 involved a bigger mix of nationalities, with 11 of the top 20 deals this year coming from China.
In contrast, all top 20 listings in 1998 were Singapore companies, according to Dealogic. But with global markets languishing, the situation here in 2009 is likely to be worse than that during the Asian financial crisis, said a senior IPO banker with a Singapore brokerage.
‘The financial crisis was only an Asian problem,’ he told BT. ‘The rest of the world was still doing well, and that’s why we were able to resuscitate ourselves.’ Still, he expects to see a recovery in equity markets in the fourth quarter of 2009.
‘We are going into a situation that is unprecedented worldwide,’ he said. ‘America is so drunk with debt that the only thing it can do is fire up the printing press. The smaller (deals) we can push out, by the grace of God.’
Perceived poor economic conditions ahead have driven some investors away because would-be listings find it hard to offer a rosy business outlook, said Daiwa Securities executive vice-president Tay Kok Soon.
‘Investors are forward looking. You’ve done well for the past three years, but what’s going to happen in 2009?’ said Mr. Tay, noting that a pick-up could come at the end of Q2.
‘This will affect the attractiveness of any company that is thinking of an IPO’ because it puts pressure on the price-earnings multiple.
On average, IPO bankers could be proposing historic PEs of two to three times, ‘but the owners of companies may not bite’, said Mr. Tay, especially those not in urgent need of funds.
With the hushed IPO market, Stirling Coleman Capital is looking for merger and acquisition (M&A) deals instead, said CEO Ang Kay Tiong.
‘We’ll focus on M&A,’ he told BT, adding that sellers are lowering their price expectations given the grim outlook.
‘The gap between buyer and seller has narrowed,’ he said. ‘Last year, sellers tended to ask a much higher price, whereas this year, I guess they are more realistic.’ But he cautioned that M&A deals are lumpy and will take some time to close.
‘Those with cash are shopping around but they are not in a hurry,’ he said. ‘And mega deals are out because the banks are not lending.’
Because China is the one bright economic spark globally, buyers are looking at companies in the consumables sector to buy some exposure to China at a lower price now, he noted.
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