| HONG KONG
HONG KONG London luxury jeweler Graff Diamonds has pulled its planned $1 billion Hong Kong initial public offering, the fourth major IPO to be called off in Asia this week, as tumbling stock markets threaten to claim yet more casualties in the region.
Graff had been due to price its IPO on Friday, putting it on the verge of becoming Asia's biggest completed flotation so far this year, but investors baulked at the issue amid market-wide fears over the euro zone crisis and China's economic slowdown.
"Consistently declining stock markets proved to be a significant barrier to executing the transaction at this time," Graff said in a statement. Graff was due to list next week.
A slump in Asian equities in the past week has already derailed three major IPOs which were aiming to raise a collective amount of up to $1.37 billion: two in Hong Kong and one in Singapore.
Deal volumes in Hong Kong, Asia's IPO capital, have plunged 85 percent in the first five months of 2012 from a year earlier. Across the Asia-Pacific, overall volumes for share issues, including secondary offers, are down by about one-third.
The value of IPOs pulled in Asia ex-Japan has jumped to $7.7 billion so far in 2012 from 46 planned offerings, up from $5.8 billion, according to Thomson Reuters data. Hong Kong accounted for most of the scrapped deals.
Graff, which had planned to raise capital to help build a bigger Asian business centering on China, pulled its IPO as European and U.S. markets tumbled more than 1 percent on Wednesday. Asian shares followed suit on Thursday, with an MSCI pan-Asia index falling 1.6 percent. <MKTS/GLOB>
Rival Tiffany & Co (TIF.N) had added to the pressure, cutting its sales forecast last week and blaming slower demand from key markets such as China.
The market slump could also pressure IPOs now on the road, such as a deal worth up to $3 billion by motor racing firm Formula One in Singapore. Despite expectations the deal will be priced next month, Formula One chairman Peter Brabeck said last week he had yet to give the final go-ahead.
"Appetite for new listings is pretty weak generally because of the macro situation," said Eugene Mak, an analyst at brokerage Core Pacific Yamaichi in Hong Kong, adding the Graff IPO did not offer a lot of upside potential.
Credit Suisse Group CSGN.VX, Deutsche Bank (DBKGn.DE), Goldman Sachs (GS.N) and Morgan Stanley (MS.N) were hired as joint global coordinators on the Graff IPO. Rothschild acted as financial adviser to the London company on the transaction.
MALAYSIA'S FELDA IPO SEEN SAFE
Malaysia launched on Thursday the biggest Asian IPO to hit the road so far this year: a $3 billion offer in Felda Global Ventures Holdings Bhd, the world's third-largest palm plantation operator. It is preparing for a market debut on June 28.
But the Felda IPO is unlikely to suffer the same fate as Graff. Cornerstone investors are taking about two-thirds of the shares, and the Malaysian government is using the sale to deliver a windfall of more the $500 million to tens of thousands of landholders ahead of an expected election.
"The chance of it being successfully listed is quite high," said Alan Tan, fund manager for Asian equities at Lion Global Investors in Singapore.
The biggest IPO still in the Asian pipeline is Chinese state-owned insurer PICC Group, which plans to raise up to $6 billion in a Hong Kong-Shanghai dual listing. IPOs from Chinese state-owned entities could be less sensitive to market volatility because they tend to be supported by funds of other government companies and by China's sovereign wealth fund.
Deals from so-called defensive sectors such as utilities or high-dividend companies should also fare better in the current market, though no IPOs are seen as easy sells, bankers said.
Formula One, whose revenues are underpinned by multi-year contracts, could appeal to defensive-minded investors, although one banker not involved in the IPO noted: "Even so, they would be quite brave to do it."
Alan Lam, Julius Baer's Greater China equity analyst, said the window for Asian IPOs could still reopen later in the year, if China eases monetary policy and buoys markets, but one capital markets lawyer in Hong Kong sounded less hopeful.
"Bankers aren't very optimistic for the second half, it's going to be very difficult," said the lawyer, who was not authorized to speak publicly on the matter.
DOUBTS OVER GRAFF VALUATION
Graff Diamonds was founded in 1960 by Briton Laurence Graff. Born to Jewish immigrant parents in London, he has always kept control of the firm, attracting wealthy and celebrity clients such as the sultan of Brunei, Oprah Winfrey and Imelda Marcos.
Some analysts and fund managers had already begun questioning Graff's valuation before Wednesday's global market sell-off, citing a slowdown in luxury spending in China.
Hong Kong's benchmark Hang Seng index .HSI has plunged 12 percent since May 7, when Graff executives, its bankers and advisers began meeting institutional investors and fund managers to gauge demand for the offering.
Stocks in the luxury goods sector have been hit particularly hard, with Chow Tai Fook (1929.HK) down about 23 percent over the same period and Tiffany falling 14 percent.
"We decided at the end of the day that it would be better to wait for a better time," said a person involved in the Graff IPO, who was not authorized to speak publicly on the matter. ($1 = 1.2882 Singapore dollars)
(Additional reporting by Michael Flaherty and Clement Tan in HONG KONG, Rachel Armstrong in SINGAPORE and Stuart Grudgings and Yantoultra Ngui in KUALA LUMPUR; Editing by Mark Bendeich)