Asia-Pacific is ‘Superstar’ of Global IPOs: Analyst


Despite volatility and uncertainty whipping stocks recently, the global initial public offerings (IPO) market saw its most active issuance in the second quarter since 2009. And one analyst says things are only going to get better, especially in the Asia-Pacific region.

"The global IPO market is on track to see a resurgence in activity in the coming months," according to a recent report by advisory firm Renaissance Capital. "Investors' underlying enthusiasm for fresh product will drive both issuance and performance during the second half," it stated.

While the volume of new listings flourished, share performance, however, languished across the board. Global IPOs on average returned 1 percent in the quarter, and Asia Pacific listings fell 5 percent, weighed by concerns in the macroeconomic environment, according to the report.

The world’s ten largest IPOs that debuted in the second quarter had unimpressive returns, with the exception of Prada, which gained 19 percent as of June 30, Russia's leading search engine Yandex which gained 42 percent, and Latin American McDonald's franchisee Arcos Dorados which rose 24 percent.

“But we very much find out in times like this that these are very good times to go public because the after-market performance for investors is better." William Smith, Founder, President, and CEO of Renaissance Capital told CNBC on Thursday. The after-market period generally begins on the first day of trading to anywhere from three to nine months after the IPO date.

Strong equity issuance in China and Hong Kong had helped the Asia Pacific region to dominate the global IPO market for the last 8 straight quarters, according to Renaissance Capital. And though Asia Pacific saw its share of IPOs slip to 40 percent in the second quarter from 56 percent in the first quarter and 54 percent in the second quarter of 2010, it was still ahead of North America and Europe.

"If you look historically for the Asia-Pacific 10 years ago, Asia-Pacific represented 12 percent of all IPOs in the world. Last year was at 66 percent of all IPOs,” Smith said.

“Asia-Pacific is the absolute superstar of the IPO market globally.”

And the pipeline looks promising. China's largest insurer People's Insurance Company of China (PICC) plans to come to market by the end of the year, with a dual Hong Kong, Shanghai listing that could raise up to $6 billion. New China Life and Taikang Insurance are also planning multi-billion dollar offerings in Hong Kong and Shanghai.

Smith shrugged off recent concerns of accounting fraud at Chinese companies, saying they were only temporary.

"We do believe that once the regulatory environment matures, that the quality of the accounting will most certainly come in place," he said, highlighting the underlying strength of Asian economies and markets.

"It won't be able to hold the IPO market down for long."