Stock offerings in Asia Pacific tumbled to a two-year low in the third quarter, with no end in sight for the grim outlook as investors remain wary of equity markets because of lingering concerns over Europe's debt troubles and the US economy.
The slump has also cut into underwriting fees, putting further pressure on investment banks as they look to slash jobs and cut costs to cope with the downturn in markets.
The region's troubles mirror the decline in Europe and the United States, where many companies are delaying initial public offerings and follow on deals until markets calm down. Bankers expect markets to remain weak in coming months, with investors sitting on the sidelines while the turmoil continues.
"It's been a difficult year, no doubt about it, because of the economic headwinds," said Sam Kendall, head of equity capital markets for Asia at UBS AG. "The fourth quarter will be challenging as well. The issues in Europe need to be resolved before we see any major resumption of deals."
Equity issuance in the region excluding Japan plunged 49 percent in the third quarter from a year earlier to $46.4 billion, according to Thomson Reuters data through September 29. Issuance fell to the smallest volume since the $44.4 billion seen in the second quarter of 2009.
For the first nine months of the year stock sales fell to $157.22 billion from $190.15 billion, down 17.3 percent.
Goldman Sachs ranked first in Asia Pacific, underwriting $12.8 billion worth of deals since the beginning of the year, followed by UBS with $10.4 billion and Morgan Stanley's $10.3 billion.
Fees on equity capital markets transactions were little changed at $3.87 billion in the first nine months of 2011 from $3.95 billion over the same period in 2010, according to estimates from Thomson Reuters/Freeman Consulting.
With competition for deals picking up in the main markets in Hong Kong, Shanghai and Singapore, companies focusing on China's smaller Shenzhen exchange took two of the top five positions in fees in Asia Pacific.
Ping An Securities Co. Ltd, a unit of Ping An Insurance (Group) Co., earned an estimated $202.4 million, followed by UBS with $179.4 million, Goldman Sachs with $169.7 million and Guosen Securities' $157.1 million, data showed.
Despite the slump in stock issuance since the beginning of the year, the number of companies filing for IPOs in Hong Kong and Singapore has reached record levels. The backlog means the market could bounce back once concerns ease over Europe's sovereign debt crisis.
"One positive point is that we haven't yet seen severe redemptions and there is still a lot of cash in the market currently," said David Suen, co-head of Asia equity capital and derivatives markets for JPMorgan in Hong Kong.
"Most investors are sitting on the sidelines, waiting for a clearer direction in Europe, where people haven't seen any concrete plan."
Comments
Comments are closed for this article.