Unlock Editor’s Digest for free
FT editor Roula Khalaf has chosen her favorite stories in this weekly newsletter.
Strong stock prices have sparked a boom in initial public offerings (IPOs), with India overtaking China as Asia’s top market for company listings this year.
In 2024, India will become the world’s second-largest equity funding market after the US for the first time, driven by companies such as Swiggy and Hyundai Motor, according to Dealogic data. The National Stock Exchange of India is expected to be number one, ahead of the Nasdaq and the Hong Kong Stock Exchange, as the leading listing venue by value, according to KPMG statistics.
This ranking foretells changes in the Asian financial world in 2024, as tightening regulations will lead to a relative listing drought in China. Meanwhile, companies are rushing to take advantage of high valuations following a multi-year rally in Indian stocks, despite concerns over whether the market will be able to weather the economic slowdown.
“This is one of the busiest periods in the history of Indian capital markets,” said V. Jayasankar, managing director at Kotak Investment Banking, who has been involved in some of India’s biggest IPOs this year. Ta. “India is certainly gaining attention. China probably needs to do more to really attract that business on a sustained basis.”
Jayasankar added that the market is supported by “very strong” domestic flows in India, with households increasingly pumping money into the domestic stock market and a significant “democratization of investment”. “The overall activity gave us a positive surprise.”
Some content could not be loaded. Please check your internet connection or browser settings.
The value of primary and secondary listings in mainland China, which was the world’s largest market in 2023, fell by about 86% by early December from more than $48 billion to just $7.5 billion in 2024, according to Dealogic. .
Analysts say the announcement of monetary and fiscal stimulus in September has helped stabilize markets after a sharp selloff at the start of the year, but the combination of a weak economy and restrictive regulations on company listings has discouraged people from entering the public markets. He said that it is hindering the pipeline of Chinese companies that are aiming for this. That year.
Scarlett Liu, Asia-Pacific equities and derivatives strategist at BNP Paribas, said the slowdown in China’s IPOs is consistent with Beijing’s policy goals.
“This is a regulatory attempt to balance the secondary and secondary markets,” he said, adding that authorities were concerned that too many listings could dry up trading activity in the secondary market. Ta.
Hong Kong, China’s offshore financial hub, has seen a relative increase in equity raising activity from $6 billion in 2023 to more than $10 billion by December, including electronics manufacturer Midea. It also includes several big deals, including raising more than $4 billion in a public offering.
Analysts say Hong Kong will continue to benefit mainland Chinese companies as a listing location to raise offshore capital.
“For Chinese companies pursuing IPOs, the Hong Kong Stock Exchange remains the best venue, offering a more streamlined listing process, market stability and transparency, and greater access to global capital.” said Frank Bee, partner and head of the firm’s corporate transactions law practice in Asia. Solid Ashast.
Some content could not be loaded. Please check your internet connection or browser settings.
India saw a slew of smaller deals in 2024, supported by companies looking to raise capital as valuations remain high, including the spin-off of Indian units of multinationals such as Hyundai.
“While the number of transactions has clearly increased, the average ticket size per transaction has come down by about 75-80% in the last two years,” said a Mumbai-based banker. “What this tells us is that[companies]are thinking, ‘Let’s run for the hills and turn a profit as quickly as possible while market conditions continue to be supportive.’
But the world’s most populous country’s rapid growth has slowed, with weak corporate performance and third-quarter gross domestic product (GDP) growth plummeting to 5.4%, the lowest in nearly two years. Overseas portfolio managers are becoming cautious about the frothy stock market.
More than $11 billion was withdrawn from Indian stocks in October, a record monthly outflow, and another $2.5 billion was withdrawn in November.
However, bankers believe the widespread boom in primary and secondary listings in India is likely to continue into the new year. “I don’t comment on the quality of the product,” said another banker in Mumbai. “As long as the market is supportive and there is liquidity, there is plenty of trading expected.”
“It is fair to say that the first two quarters of 2025 will see no change from the current situation,” he added.
Global investment bankers also remain bullish on India, but warn that a bigger backlash in the US and other countries could erode India’s relative growth. .
“Globally, I expect IPO market activity to normalize in 2025, with volumes increasing, particularly in the US and Europe, and perhaps even China.However, even as India continues to grow, I expect I’m not surprised,” said Gareth McCartney, global co-head of equity capital markets at UBS.
