SINGAPORE/HONG KONG/SEOUL -- New company listings have slowed dramatically in Asia in recent months after initially getting off to a quick start.
While proceeds from new listings in the first quarter were 18% higher this year than in 2021, the drop-off in Asia-Pacific initial public offering activity in the second quarter has brought proceeds for the year through June 14 to $50.5 billion, 26% below the total at the same point last year, according to Dealogic data.
The year has seen 356 new primary listings so far, down 31% from 2021.
By comparison, Dealogic's global IPO count is running 53% below 2021 levels, with proceeds down 72%. The U.S. and Europe each account for just one of the year's 10 largest IPOs, leaving Asia to dominate the top ranks.
Market turmoil stemming from Russia's invasion of Ukraine in late February, new COVID outbreaks, spiraling inflation and monetary tightening has kept many IPO hopefuls on the sidelines in recent weeks.
"Many organizations have chosen a 'wait-and-see' approach to economic revival and have postponed their fundraising activities due to market uncertainties," said Eddie Wong, Hong Kong capital markets services partner for PwC. Edward Au, Deloitte's southern China managing partner, said his firm now "expects a sharp decline in the number of new listings and proceeds raised in Hong Kong in 2022."
PwC has similarly slashed its forecast for Hong Kong primary listing takings this year to between 180 billion Hong Kong dollars ($22.93 billion) and HK$200 billion, half the level projected at the start of the year.
Hong Kong, the world's top IPO market as recently as 2019, is not even in the top 10 this year. So far, the city has seen 22 new primary listings -- 53% fewer than last year -- together raising around HK$17 billion.
In a twist, four New York-listed Chinese companies have secured backup listings on the Hong Kong Stock Exchange "by way of introduction" -- a speedy method in which they forego raising new funds while protecting themselves against possible U.S. ejection.
With Hong Kong fading, Shanghai's STAR Market has risen as the world's busiest IPO market, with $14.37 billion raised so far, besting the Nasdaq Stock Market's $12.61 billion.
But the New York exchange has seen twice as many new listings as STAR. New additions to the Shanghai exchange are down 44% from a year ago, though the board is the only world market to have hosted two of the top 10 IPOs: solar panel producer Jinko Solar and integrated circuit designer Suzhou Novosense Microelectronics. Unlike in the past, prices for most of the new STAR listings fell after the companies went public.
South Korea has seen a series of large companies cancel their IPO plans, including Hyundai Engineering and cybersecurity company SK Shieldus, which were each seeking more than 1 trillion won ($775 million).
"We saw investor confidence shrink rapidly over the past few months due to the growing uncertainty of global macroeconomic conditions," said SK Shieldus. "We decided to withdraw going public and review the plan again in the future when the corporate value is properly assessed."
The Korea Exchange has counted nine withdrawals, with just one new corporate listing and one for a real estate investment trust, compared with 15 IPOs last year. Still, LG Energy Solution's $10.73 billion IPO ranks as the world's largest so far this year, according to Dealogic.
IPO candidates have also become nervous about other Asian markets. In Japan, commerce enablement startup AnyMind Group in March called off its listing on the Tokyo Stock Exchange's Mothers section, which had been expected to value the company at 60 billion yen ($446 million).
"Institutional investors' willingness to buy shares in the secondary market is rapidly decreasing, and the share price after listing is not predictable," an AnyMind executive said. "If the stock price stagnates significantly, there could be challenges to our capitalization policies."
India, meanwhile, hosted the region's second-biggest IPO, with the $2.72 billion IPO of state-owned Life Insurance Corp. of India. Southeast Asian offerings were led by the $957 million share sale on the Indonesia Stock Exchange of GoTo, which was formed through the merger of ride-hailing service Gojek and e-commerce platform Tokopedia.
Despite the recent slowdown, PwC expects activity in Hong Kong will return to normal levels in the second half of the year, with at least three HK$10 billion offerings and twice as many in the HK$5 billion to HK$10 billion range.
Three share sales are now ongoing, including the HK$671 million offering of intracity logistics service GoGoX, which is set to list on Friday.
This month, Hong Kong saw its second listing of a special purpose acquisition company (SPAC). Claudius Tsang, chief executive of A SPAC Holdings, expects to list another such vehicle in the city soon.
Some like Tsang think that New York-listed Chinese companies might choose to back up their position by merging with Hong Kong SPACs instead of the conventional listing route.
"As SPAC listings can provide greater certainty in valuation, these companies may prefer to list via SPACs than the traditional route in order to live up to the valuation expectation of the company's owners," said Deloitte's Au.