September 26, 2011 / 7:00 AM / 8 years ago

DEALTALK-Market turmoil takes toll on HK, Singapore IPOs

* Companies may try alternative funding plans as IPOs delayed

* SGX CEO Bocker says investors “very cautious” on going into IPOs

* IPO applications in HK up 35 pct this yr through Aug versus 2010

By Elzio Barreto

HONG KONG, Sept 26 (Reuters) - IPO hopefuls that have lined up in record numbers to go public in Singapore and Hong Kong in 2011 are giving up listing plans for now as investors’ appetite for stocks vanishes and the window for new share-sales closes.

With markets on high alert over Europe’s sovereign debt crisis and concerns over the U.S. economy, the list of Asia IPO’s getting pulled is getting longer. That would mean companies might have to seek slower growth or find alternative ways to raise funds.

Singapore shares fell to a 16-month low on Friday, while Hong Kong’s market ended the week with its worst performance since 2008. The slump continued on Monday, with benchmark measures plunging more than 2.6 percent and 3.7 percent, respectively.

Sany Heavy Industry and rival XCMG Construction Machinery Co Ltd were the latest casualties caught in the storm shaking markets, after deciding to postpone up to $4.5 billion in deals last week.

Insurers, brokerages and banks including Haitong Securities , New China Life and China Guangfa Bank that have unveiled massive capital-raising plans could also face pressure.

“At the moment all you have is bad news coming into the market,” said Philippe Espinasse, a former investment banker with Nomura and UBS in Hong Kong and author of ‘IPO: a Global Guide’.

Hong Kong, the top global destination for initial public offerings for two years running, has seen a surge in IPO applications.

The former British colony had a pipeline of 115 companies with active IPO applications in 2011 through the end of August, 35 percent more than the same period in 2010, according to exchange data.

The figure reflects the number of companies that received approval from the Hong Kong exchange’s listing committee, but still haven’t sold shares.

Hong Kong’s increase in IPO applications is also mirrored in Singapore.

“We never had so many companies wanting to come to the Singapore market,” Singapore Exchange Ltd CEO Magnus Bocker said at an event in Hong Kong last week. “That happens at the same time the markets are very volatile and I think there’s a lot of investors that are very cautious to go into IPOs.”

“We need to see what happens in Europe and the U.S., that needs to be resolved before we see the real flow of new IPOs coming,” he added.

Despite the surge in IPO submissions, several companies have postponed or cancelled listing plans the past months, including China Everbright Bank and container leasing company China Shipping Nauticgreen.

After getting started with investor meetings and setting listing dates, both Sany Heavy, China’s largest construction machinery maker, and XCMG Construction had to give up plans last week.

“It’s very challenging at the moment. Anyone that has a deal live right now is scrambling to get it done,” said the head of equity capital markets at a top international investment bank, who was not authorized to speak publicly on the matter.

Citic Securities Co Ltd is braving volatile markets with its nearly $2 billion offering fully covered by orders from cornerstone and anchor investors, but others might face more difficulty.

PCCW Ltd , owned by tycoon Li Ka-shing’s son Richard Li, said late on Sunday it could raise up to $1.3 billion from the spin off of its telecommunications assets in a business trust, but the listing was “subject to market conditions and pricing.”

Citic Securities, Haitong Securities, New China Life and China Guangfa Bank, were among financial companies that unveiled plans to raise $35.4 billion in stock offerings in Hong Kong and China in coming months to replenish their capital base.

Citic Securities Chairman Wang Dongming said on Wednesday the Hong Kong offering, set to be priced on Sept. 28, had been “very well received” by investors.

For other financial services companies, it may be time to examine options.

“Banks will have to slow down their balance sheet growth, cut their dividends to preserve capital,” said one investment banker, who advises financial institutions. “Some of them might take some private investments or do small private placements to tide over the immediate problem.”


The record IPO applications signal companies want to be ready to tap markets if appetite for equity offerings returns soon, Espinasse, the former investment banker, added.

Depending on how long the IPO applications have been approved, companies will have to update their financial information before starting to market deals to investors.

“Things tend to bounce back here faster than the rest of the world,” Espinasse said. “God knows what’s going to happen in two or three months’ time and whether the markets will be back. Probably people are taking stock of that.

“People probably take the view that why don’t we do that, so we’re in a position to launch a transaction reasonably quickly once the market picks up again,” he added. (Additional reporting by Denny Thomas; Editing by Muralikumar Anantharaman)

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