A burnt child dreads fire. For investors who have recently got their fingers burnt on stock markets, safer investment vehicles now stand as better investment options than risky securities until the global equity market returns to a point of stability.
Given the high volatility, along with negative skewness, in the global equity markets, it is understandable to see investors becoming loss-averse of late, as large economies continue to tinker to combat the global financial crisis.
The MSCI AC Asia Pacific Excluding Japan Index - an index designed to measure the equity market performance of Asia excluding Japan - has lost its value by around 12 percent in the past one year. While the MSCI Europe Index - that tracks the equity market performance of the developed markets in Europe - fell by around 8.38 percent.
Realising that a dangerous cocktail of eurozone crisis and slow down in large Asian countries is in the making, some big names have lately pulled out or deferred their plans to issue equity.
In addition to that, corporations are also caught in a recallability trap, stemming from Facebooks listing experience, which has aroused a frisson of terror among potential equity floaters. Shares of the worlds largest social networking website had touched a low of $ 25.87(closing price) during the first week of June 2012, registering a drastic fall from an initial offering price of $38.
Recently, Graff Diamonds, UK-based luxury jeweller, has pulled its plan to raise $1 billion from an IPO in Hong Kong, while Formula One - motor sport racing company - delayed $2.5 billion in a Singapore listing and Manchester United - U.K. football club - has reportedly changed its initial plan to list in Singapore to listing in the Unites states.
They are not alone; other global players accompanying them are Georgian Railway, China Nonferrous Mining Corp, China Yongda Automobiles Services and Hyundai Oilbank, etc
Corporations have raised around $53.5 billion since the start of the current year, compared to $99.2bn in the same period of last year, according to data from Dealogic published in a renowned international news paper. While another news agency quoted, "Deal volumes in Hong Kong, Asias IPO capital, have plunged 85 percent in the first five months of 2012 from a year earlier".
The domestic stock market is also part of the global flock as only two companies: Next Capital and TPL Trakker Limited made a foray on the stock market this year.
There, there. Not all corporations and markets are skittish. Lately IPO of Felda Global Ventures Holdings Bhds (FGVH) - Malaysian plantation operator - bucked the trend as they saw shares oversubscribed by around 6.75 times. FGVHs IPO is this years second biggest initial public offering after Facebook, with intention to raise around $3.3 billion.