LONDON/HONG KONG Worldwide share issues slumped to a seven-year low in the first quarter of the year, as market volatility claimed the hopes of companies seeking to list their stock, Thomson Reuters data showed on Friday.
The value of total share sales, including secondary issues as well as flotations, more than halved to $106.6 billion, the lowest since the immediate aftermath of the global financial crisis at the beginning of 2009, the data showed.
Markets have been roiled by fears of slow economic growth globally and the CBOE Market Volatility Index .VIX remained stubbornly above 20 for much of this year, the level seen as safe for stock market hopefuls to attract investors.
That turbulence made it difficult for many would-be market debutants to persuade investors of the value of their shares. Money raised via flotations or initial public offerings (IPOs) slid by almost 70 percent to $12.1 billion.
"With the VIX above 20, price discovery is challenging," said Gareth McCartney, head of EMEA equity syndicate at UBS. "For much of the first quarter, as one investor put it, 'what's not to worry about?'."
In turn, banks had a thin quarter for equity capital market (ECM) fees from advising on the sale of shares. JP Morgan (JPM.N) led global ECM fee rankings, collecting $215.4 million, down more than two-fifths on last year, followed by Morgan Stanley (MS.N) and BofA Merrill Lynch (BAC.N).
The biggest riser was Haitong Securities (600837.SS), which leapfrogged to number 10 from 48 having worked on the largest IPO of the year, that of China Zheshang Bank (2016.HK), which raised HK$13 billion ($1.7 billion). That transaction helped Hong Kong become the world's most active stock exchange for deals, followed by London and Tokyo.
For the first time since 2008, the New York Stock Exchange saw no IPOs at all. That meant the United States crashed down the rankings, with the amount raised plunging 92 percent on last year to leave it with a market share of only 3 percent against 14 percent.
Of all three major regions, Asia Pacific suffered the least for IPOs with a 44 percent drop in money raised. And activity looks set to continue in China, analysts and bankers said, since a slew of policies aimed at bolstering the economy could help unleash more listings.
"In the major market in China, they will keep promoting the stock market and try to improve the liquidity. That should help energize the market and the economy," said Ringo Choi, Asia-Pacific IPO leader at consulting firm EY.
Low oil prices had led some to expect a string of rights issues as energy companies floundered. But while energy and power accounted for two-fifths of global follow-on activity, mainly in the U.S. market, secondary share sales as a whole were down 57 percent.
Energy deal levels were reduced by a mild rally in oil prices and creditors being unwilling to take over struggling companies.
"It's been a tough market for people to generate returns, which has kept sentiment fairly low despite indices making some good gains from the lows," said Tom Johnson, co-head of ECM for EMEA at Barclays (BARC.L).
"To a large degree it's been a commodity-driven rally and people haven't been on the right side of that trade."
Bankers had mixed feelings over the months ahead, as they face continuing macroeconomic fears, the spectre of a possible UK exit from the European Union, and the U.S. election.
That said, there are bright spots. Postal Savings Bank of China (PSBC) is seen raising up to $15 billion in one of the world's largest stock market flotations this year, expected for the second half of 2016, bankers have said.
And interest rates that remain at or near rock bottom, combined with quantitative easing in Europe, should still drive investors into equity deals.
"We are in a period of a cheap money and there’s no obvious end in sight. That means generally good conditions for the equity markets," said Albert Ganyushin, head of international listings at Euronext (ENX.PA). "Because for investors, what are you going to invest in?"
(Editing by David Holmes)
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Updated Date: Apr 01, 2016 05:30 AM