Asian stock exchanges have seen it all this year: a bank whose customer base of 320 million is larger than the population of the United States, a French cosmetics maker, a microlender and a Chinese pharmaceutical company that makes an anticoagulant.
And it is not just the variety of stocks on offer. It is the sheer number of companies rushing to market in Asia, and the huge amounts they are raising.
General Motors may have raised $23.1 billion in its initial public offering but it is fast-growing Asia, not Wall Street, that has had most of the world's new listings this year.
Eight of the ten largest market debuts in the world this year took place on Asian stock exchanges.
Two of the biggest for American International Assurance, the Asian unit of American International Group, and the giant lender Agricultural Bank of China and each raised more than $20 billion. That is about three times as much as the total amount raised in 70 share listings in North and South America during the third quarter of this year.
Rise of Asia
“The rise of Asia has been accelerating since the financial crisis,'' said Vikram Malhotra, co-head of investment banking for the Asia-Pacific region at Credit Suisse in Hong Kong.
In 2000, 21.5 per cent of all initial public offers globally, in terms of value, were raised on stock exchanges in the Asia-Pacific region.
This figure has climbed to 64 per cent, according to data compiled by Dealogic. The Americas, which in 2000 accounted for 41 per cent, have dropped back to 20 per cent even with the GM issue.
And despite the recent market nervousness, which has prompted at least two companies in Asia to put their IPOs on ice, the total value of initial public offerings in the region this year could match, or even exceed, the boom year of 2007, many investment bankers say.
In terms of volume, “this could be the best year ever for Asia, outside Japan,'' said Ashok Pandit, co-head of equity capital markets for Asia at Deutsche Bank in Hong Kong. And 2011, he added, could be just as strong.
And it is not just Asian companies that are going public in the region. L'Occitane, the French cosmetics maker, and Rusal, the aluminium giant controlled by a Russian oligarch, Oleg V. Deripaska, were among the first to seek primary listings in Hong Kong rather than in Paris or Moscow this year.
Last week, Caterpillar issued a renminbi-denominated bond for about $150 million, highlighting how important a location Asia has become for other forms of issuance, too.
The reason for all this activity is that Asia outside Japan is enjoying stellar economic growth. Investors are eager to secure exposure to Asian markets and with interest rates still low in many parts of the world, there is plenty of cash looking for potentially higher returns in the region. All this has helped send stock markets across much of the region higher this year and ensured that even large listings like that of American International Assurance in October were heavily subscribed.
In Europe and the U.S., by contrast, economies are still struggling to gain speed, while jitters about the debt levels of countries like Ireland and Greece have affected sentiment.
“There was a lot of caution in the markets during the first seven months of the year,'' said Todd Marin, the head of investment banking in the Asia Pacific region, excluding Japan, at JP Morgan Chase & Co. “But since August, we've seen a huge amount of cash looking for a home and Asia comes out looking very appealing.''
The flow of capital into Asian assets has been so rapid that, some analysts say, asset bubbles are in the making. Most say that Asia is not quite there yet, though, and that the rally in Asian stock markets and initial public offerings still has some way to run.
“Tactically speaking, there may be too much froth at present," analysts at Citibank wrote in a recent note. "But we are strongly of the belief that markets are not in bubble territory.''
The Asian share of global mergers and acquisitions has grown as well. The region is not quite as dominant in this field as it is in share listings, but the past few years have seen overseas companies making more purchases in Asia and Asian companies becoming more active acquirers.
Nearly 23 per cent of mergers and acquisitions globally by value have been on assets in the Asia-Pacific region this year, according to data compiled by Thomson Reuters.
That is up from 21.8 per cent in 2009. Similarly, 25 per cent of purchases so far this year were staged by Asian-based acquirers, up from 21 per cent last year.
“Back in 1999, no one would have said that this part of the world was a serious M&A market,'' said Gordon Paterson, who heads Deutsche Bank's team in the Asia-Pacific region for mergers and acquisitions. “China was not even on the map, as far as M&A activity is concerned. It's only in the last six years that Chinese companies have emerged as serious buyers.'' — New York Times News Service