Cash Tidal Wave Gives Asia Best Ever Third-Quarter Share Sales

(Bloomberg) -- With the pandemic disrupting holiday plans, many bankers and investors seem to be keeping themselves busy with deals. That, along with buoyant markets and abundant liquidity, has pushed equity sales in Asia to their best third-quarter on record.

Companies in the region have raised $120 billion through initial and follow-on share sales since July 1, the most ever for the third quarter, data compiled by Bloomberg show. First-time share sales have also hit an all-time high, thanks to a jump in so-called “homecoming listings” by U.S.-listed Chinese firms seeking a trading foothold in Hong Kong.

Deal activity has been fueled by the mammoth liquidity pumped into the financial system by global central banks, as they look to cushion the world economy from the effects of the virus outbreak. A benign market backdrop has also helped. Stocks have climbed steadily from March lows despite continuing negative headlines about the pandemic, with the MSCI Asia Pacific Index setting a new 2020 high on Aug. 31.

“When the market pulled back, everyone anticipated a continuation, but it rebounded extraordinarily quickly,” said Aaron Arth, head of Asia ex-Japan financing group at Goldman Sachs Group Inc. “Many investors didn’t participate in that upside, so a very attractive place to try and make up some of that performance is in the new market issuances.”

That said, bankers aren’t seeing a let-up in deal activity as 2020 draws to a close

The initial share sale of Jack Ma’s Ant Group -- which could be the world’s biggest-ever IPO -- is among the most-anticipated transactions of the fourth quarter. The fintech giant could raise as much as $35 billion through a dual listing in Hong Kong and Shanghai as soon as October.

Fear of Missing Out

Meanwhile, Chinese companies have continued to dominate the Asian ECM space, accounting for 66% of total issuance in the third quarter. The eight biggest listings were by Chinese firms, including a $7.5 billion Shanghai offering by the nation’s largest chipmaker, Semiconductor Manufacturing International Corp., and Yum China Holdings Inc.’s $2.2 billion homecoming listing in Hong Kong.

Investors -- both retail and institutional -- have shown a voracious appetite for deals.

Bottled water giant Nongfu Spring Co. emerged as Hong Kong’s hottest IPO for mom-and-pop investors, with its retail subscription rate the highest on record for the city’s IPOs over $1 billion. Two Chinese electric-carmakers pulled off billion-dollar U.S. IPOs in August that were priced above their indicative ranges. One even sold more shares than initially planned.

“You have a fear of missing out among investors,” said Gregor Feige, head of emerging Asia ECM at JPMorgan Chase & Co. “You don’t want to miss that next, huge market-defining IPO.”

Record August

Holidays typically make August a quiet month for equity capital markets in Asia, but a surge in share sales meant this August was the busiest ever.

And while fears of a pickup in market volatility around November’s U.S. presidential election had several firms rushing to complete their transactions, bankers say there are still deals planned for the remainder of the year.

“Some transactions scheduled for 2021 have accelerated into 2020 on the back of strong liquidity and favorable secondary market performance,” said Anvita Arora, co-head of APAC ECM at Bank of America Corp. “The market is less-fundamental driven and very liquidity-driven right now.”

©2020 Bloomberg L.P.