Businesses in Asia are confident that initial public offering (IPO) activity will see an upsurge in the coming year, according to a new report.
A survey of senior executives found that 44 per cent of Asia-based respondents expect IPO markets to return to last years’ highs within a year.
The study titled ‘Taking Stock: Going Public in Volatile Times’ was conducted by global law firm Reed Smith, in partnership with Mergermarket.
A further 11 per cent believe markets will rebound within six months, while none expect a rebound in other regions.
However, respondents also show caution, with 70 per cent saying the recent turmoil in Chinese equity markets has influenced their IPO strategy.
“It is challenging in the more established Asian markets such as Singapore and Hong Kong, in part due to the domino effect of US Fed rate decisions and the Chinese slowdown, but also just the sheer base of each market is very different,” Reed Smith corporate partner, Hong Kong, Denise Jong said.
Jong further said Singapore is much smaller, while Hong Kong is a bit bigger – and so may be able to weather the storm better.
The report assesses the recent volatility in the capital markets, how companies are preparing themselves to launch IPOs when markets become receptive to new issues, and the post-IPO challenges companies may face.
“Investor appetite for IPOs has dulled considerably over the last 12 months,” says Nick Cheek, global managing editor at Remark, the publishing and events division of the Mergermarket Group.
Global IPO volume has fallen 38 per cent to just 339 in the first six months of 2016, from the first half of 2015 with a total of 544.
“The reasons for the decline have been well documented including uncertainty surrounding the outcomes of both the 2016 US election and the UK’s EU referendum – where the leave result has only succeeded in ratcheting up the volatility. Yet despite the uncertainty, the results of our survey suggest that companies globally are optimistic about the future direction of activity,” Cheek said.
When it comes to post-IPO challenges, 59 per cent of respondents cited greater public scrutiny among their top three reservations, while nearly half (49 per cent) said concern about their stock being subject to market volatility ranked in the top three.
Short-termism, shareholder pressure and the risk of litigation also ranked high in the list of reservations about being a publicly listed company, the report added.
The survey was conducted on 100 C-level executives, across Asia pacific, North America and Europe. All 100 companies are considering IPO in next three years.