Volatility in global equity markets and weak risk appetite have forced many companies to shelve their capital raising plans leading to a sharp fall in the number and value of initial public offerings (IPOs) in this quarter, says Ernst & Young.
So far in the third quarter of the year companies have raised $24.1 billion globally via IPOs. This is almost 50 percent lower than the previous three months, according to data from Ernst & Young. The number of deals totaled 165, down from 248 in the second quarter.
U.S. cosmetics group Coty, which was looking to raise $700 million in an IPO planned in New York, is among the latest companies to shelve plans until next year because of the uncertainty over global markets.
Asia Still Hot
Asia, however, was a pocket of strength for IPO activity, accounting for close to 80 percent or $18.3 billion of overall capital raised this quarter. The exchanges in Tokyo, Shenzhen and Malaysia saw the most funds raised.
“Asia Pacific is performing better than last year with confidence due to some exceptionally large deals,” Terence Ho, Greater China leader at Ernst & Young said.
Out of the top 10 global IPOs this quarter, six were listed on Asian stock exchanges. Japan Airlines’ $8.5 billion listing on the Tokyo Stock Exchange last week was the world’s second biggest this year after Facebook’s $16 billion listing in May.
Malaysia's IHH Healthcare, which is listed on the Singapore Stock Exchange and Bursa Malaysia and China's Inner Mongolia Yitai Coal on the Hong Kong Stock Exchange, were also among the largest this quarter at $2.1 billion and $900 million respectively.
Malaysia has emerged as a hot IPO destination this year, with a string of billion dollar-plus deals including a $3.3 billion listing in June by palm oil firm Felda Global Ventures and pay-TV company Astro Malaysia’s $1.75 billion IPO expected in October.
Ho expects an uptick in activity in Asia during the fourth quarter of the year as investor appetite shows some signs of improvement.
“With one major deal in the last couple of weeks (Japan Airlines listing) and billion-plus deals expected shortly, we are more positive that significant investor confidence will return next quarter,” said Ho.
Asia has over 200 companies in the IPO registration pipeline – representing more than half of the companies globally looking to raise capital via the equity markets.
"Several large IPO deals are expected by end of 2012 and the market continues to be opportunistic and selective. We expect more volume in first half of 2013. Industries to watch include technology, consumer products and industrials sectors,” he added.
By CNBC's Ansuya Harjani