Midea and Bajaj Housing Finance warm up Asia’s IPO market

The two large listings are adding to a sense of optimism, in particular in India and Hong Kong, with Taiwan enjoying a record year so far; and before the US Fed cuts rates this week.

September 17, 2024

Asia has seen a flurry of deals in Asia equity capital markets over the last few weeks, and this trend is set to continue according to market experts.

Thsi week Hong Kong has seen its largest initial public offering (IPO) with Foshan-headquartered Midea Group raising HK$31 billion ($4 billion), well above market expectartions. It also had the feel good factor of attracting back global investors to the Special Administrative Region (SAR) after years of turmoil through the protests and Covid-19. Investors include Hillhouse Investment, GIC, Tamasek Holdings, and UBS Asset Management, according to a report in Bloomberg. 

Midea is a global home appliance firm which makes products such as air conditioners. Midea climbed 7.8% on September 17 to HK$59.2, and going into the mid-autumn festival, a public holiday on September 18 with no trading, the Hang Seng Index was up 1.32% finishing on 17,652, and should be nicely poised before the US Fed cuts rates later in the week.

The aim of the IPO in Hong Kong, in addition to its listing in Shenzhen, is to seek money for further acquisitions and expansion. 

Yang Wan, M&A Asia partner, at Dechert told FinanceAsia: “The recent listing of Midea shows that the Hong Kong market is not really short of cash -- [the issue is] the lack of prospects for profits in a high interest environment."

Wan added: "Now that a rate cut is almost certain, good companies who are offering at good prices (such as Midea) will encourage inactive investors to take actions.”

Commenting on LinkedIn, Bonnie Chan, chief executive officer of the Hong Kong Stock Exchange (HKEX), sent her congratulations to Midea Group “on the world’s second-biggest IPO this year”.

Chan added: “HKEX is an international fundraising platform that helps companies raise capital in stages beyond just the IPO. We’ve already seen more than $20 billion in follow-on deals so far this year, underscoring the breadth and depth of our markets, and their ability to support diverse and substantial offerings."

Chan continued: "Today’s listing also highlights the China Securities Regulatory Commission’s earlier pledge to support the Hong Kong market and to facilitate more IPOs from leading mainland [Chinese] enterprises.”

Going into the mid-autumn festival on September 18, a public holiday in the Special Adminisatrative Region (SAR), the Hang Seng Index was up 1.32% finishing on 17,652.

Another success this week for Asia's equity markets was Indian home loan provider Bajaj Housing Finance, which raised $871 million, hitting its upper circuit after climbing 10% on its debut on Monday. The IPO was heavily oversubscribed and the success of the IPO, for the Pune-headquartered multi-billion dollar company, followed two successful large listings in India in August for electric vehicle manufacturer Ola Electric Mobility and baby-product firm Brainbees Solutions.

Taiwan is another Asian market that is heading for a record year in equity capital markets, according to data provider Dealogic. Volumes have already topped $7 billion year to date, the busiest on record, across a range of famous tech names via combinations of global depositor receipts (GDRs) and convertible bonds (CBs) and other equity products.

Citi has been an active bookrunner, with a market share of close to 60% in what is a key market for the US-headquartered global bank.

Cyclical recovery

After a tough few years, the appetite amongst investors for Asian equities could finally be turning. 

Udhay Furtado, Citigroup’s Asia head of ECM Origination and Solutions, told FA: “We are in the beginning stages of a cyclical recovery and expect the market to pick up further with more billion-dollar plus deals from Asia. Valuation gaps are narrowing, and we are seeing some signs of confidence returning, [and] we have been especially active in markets such as India and Taiwan, for example.”

Hong Kong-based Furtado added: “Monetary easing, superior growth in the region, and strong aftermarket performance from recent listings should spur greater IPO activity across the region. There is a sizeable pipeline of high-quality Apac companies coming to market that will be interesting for global investors.”

Across the first eight months of this year, Citigroup is currently ranking first in the league table for Apac equity offerings, according to Dealogic, and tops the league tables for equity and equity-linked offerings in India and Taiwan. 

As the market eagerly awaits the US Fed to cut rates this week, expect to continue to see more deals across a wide range of sectors over the next 18 months in Apac. 

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