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Too much bullishness?

IPOs could see new highs in 2011, say analysts
By Chris Howells | Posted: 16 December 2010 2210 hrs

SINGAPORE: Globally, the cash raised from initial public offerings (IPOs) this year is forecast to beat the 2007 high of 295 billion US dollars and Asia is leading the pack, with the region accounting for two-thirds of the money raised in 2010.

Next year, analysts said the amount raised globally could set a new record, though investors are likely to lean toward bigger, higher-quality listings.

From Agricultural Bank of China, to AIA, prominent initial public offers in the region have traded well since their listings.

Agricultural Bank is up more than 25 per cent in Hong Kong since its dual-listing in Hong Kong and Shanghai in July, while AIA's Hong Kong shares are up 12.3 per cent.

These large and successful listings made 2010 the year of the Asian IPO.

Lee Sze Yeng, Financial Services Partner with KPMG, said: "If we can relate to how the Asian economies are coming together, and the kind of importance it will play in the global scene, I think the Asian dominance will continue to prevail so if you look at the 2010 IPO listings we had where Asia contributes to two thirds of the listings, I think that trend will still go strong going forward."

Financial Services dominated the Asian IPO scene in 2010, with banks and insurers as the top issuers but market watchers see commodity-linked companies playing a bigger role in cash raisings next year.

"We've already seen the Rusal Aluminium listing in HK, which went off very well late this year, and I think that's setting a precedent for more such issues, so I'm quite optimistic and I think commodities-linked companies really would be the big bets in 2011," said Arjuna Mahendran, MD & Head of Investment Strategy - Asia with HSBC Private Bank.

Analysts said, however, that investors are seemingly more interested in bigger listings, giving a miss to smaller issuances and issuers.

Recent Singapore IPOs, such as Mewah Group and Sabana Shariah Compliant Industrial REIT, are trading well below their offer prices down 3.6 per cent and nine per cent respectively.

While bigger listings in Singapore such as Global Logistic Properties and Mapletree Industrial Trust have risen eight per cent and 15 per cent respectively.