European IPOs are ‘back with a vengeance’
Global stock listings surged 60 percent in the first half of the year, with Europe grabbing the top spot for capital raised, a report by EY showed on Wednesday.
Between January and June, 588 deals raised a total of $117.7 billion—the highest amount of capital generated in the first half of a year since 2007.
Led by London, Europe saw the biggest gain in capital raised, with 162 initial public offering (IPOs) delivering $44.5 billion.
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"Interestingly, Europe came back with a vengeance," the report's author, Maria Pinelli, told CNBC.
"It led the way in terms of capital raised in the areas of consumer product, retail, health sciences, financial, backed primarily by private equity sponsored companies—about 45 of them."
She attributed the upsurge in activity to the improving economic climate and supportive monetary policy from regional central banks.
U.K. key interest rates remain at record lows and the European Central Bank recently launched a host of stimulatory policies, including imposing a negative rate on its deposit facility and plans to offer more cheap long-term loans to banks.
Meanwhile, economic data signals a gradual recovery in the area. For instance, Monday's PMI numbers from Markit pointed to continued growth in euro zone business activity this month, albeit it a slowing rate.
"We are seeing high levels of activity in the traditional U.K. and French hotspots—with a key driver being financial sponsors looking to exit investments. We also see activity spreading out to other mainland European exchanges as the economic recovery takes hold, which is a very promising sign for the strength of the European IPO market," Pinelli said in the report.
Recent stock listings include Lloyds Banking Group's £1.3 billion ($2.2 billion) sale of a 35 percent stake in its TSBbusiness last week.
TSB shares rose 12 percent immediately after their debut on Friday and are currently trading at 289 pence, well above their launch price of 260 pence.
Pinelli said IPO stocks outperformed the broader equity markets in the second quarter, but also noted that first-day returns declined on the previous three months.
"I don't think pricing is a concern for investors at the moment, because they are being so cautious," she told CNBC. "Investors are not willing to overpay for certain stocks and, in fact, 90 percent of institutional investors say this is the primary issue on their minds."
Peter Lenardos, an analyst at RBC Capital Markets in London, concurred that investors remained discerning on price, despite the surge in issuance.
"Investors are still discriminating when it comes to the price. But when you look at IPO activity, especially in Europe… this is basically a European-led IPO rally," the director of pan-European financials told CNBC on Friday.