Global 2nd-qtr equity issuance rebounds; outlook bleak
LONDON (Reuters) - Global equity capital markets activity rebounded in the second quarter as financial institutions scrambled to raise capital, but the bleak economic outlook means bankers are cautious for the second half, according to Thomson Reuters data release on Friday.
Issuance in initial public offerings, follow-on issues and convertible bonds amounted to $255.9 billion in the second quarter, up 97 percent from the first quarter, but down 14 percent from the year-ago period, the data showed.
About one-fifth of the total was raised by Britain's Royal Bank of Scotland Plc (RBS.L), Swiss bank UBS AG (UBSN.VX) and Lehman Brothers Holdings Inc LEH.N, the smallest of the major Wall Street banks.
"With those deals, the market as a whole saw that as a sign that it was able to remove concern about the systemic risk in the market. That stimulated quite a rally," said John Crompton, head of Merrill Lynch & Co Inc's MER.N EMEA equity capital markets team.
"But we have moved away from a market that had systemic risk in mind to a market that is more concerned with economic issues," added Crompton, who was involved in the RBS and UBS transactions.
With the credit crisis at its eleventh month, the mix of rising inflationary pressure and slower global growth is denting investor appetite.
Early this month, HBOS Plc HBOS.L, the biggest British home lender, was forced to defend its 4 billion pound ($7.90 billion) rights issue as its shares fell below the rights issue strike price amid weak demand.
Shares of Cadogan Petroleum Plc (CADP.L), a Ukrainian gas firm, have fallen more than 20 percent since their $299 million London market debut on June 18.
IPOS
Global IPO activity totaled $34.8 billion in the second quarter, a 13 percent drop from the first quarter and a 69 percent slump from a year ago.
"There is little appetite from institutional investors to move away from stocks they own already and do something else," said Hermann Prelle, joint-head of EMEA investment banking at
UBS.
"The discounts they are asking for are so large that they are putting off issuers at a much higher rate than we were expecting," he added.
Equity capital markets bankers are hoping the privatization plan of German railway operator Deutsche Bahn AG DBN.UL might revive sentiment and replicate the success of Visa Inc's (V.N) $19.7 billion share sale in the first quarter.
Deutsche Bahn could raise as much as 8 billion euros ($12.46 billion) in a November listing arranged by Deutsche Bank AG (DBKGn.DE), Goldman Sachs Holdings Inc (GS.N), Morgan Stanley (MS.N) and UBS, surpassing China Railway Construction Corp Ltd's (601186.SS) $5.7 billion IPO to be the world's second biggest this year.
The French government might also off-load some of its 93 percent stake in nuclear reactor maker Areva SA (CEPFi.PA) in a benchmark deal worth as much as 6 billion euros, bankers said.
And if Denmark's Dong Energy revives its flotation plan, that could contribute another $3 billion to the IPO flow in the second half.
JP Morgan topped Thomson Reuters Global Capital Markets league table for the first half to date, followed by Goldman, Citigroup Inc (C.N), Morgan Stanley and Lehman.
($1=.6419 Euro)
($1=.5066 Pound)
(Additional reporting by Mathieu Robbins and Eleanor Wason; editing by Jeffrey Benkoe)
