As Chinese IPOs Stumble, Investors Look Elsewhere in Asia

Date:

For investors looking to bet on new share offerings in Asia, the center of gravity is shifting away from China.

In a year during which Beijing’s regulatory assaults on its companies riled the market and upended a yearslong record of great returns from Chinese new-economy stocks, India, South Korea and Southeast Asia have become alternative sources of alluring, big-ticket initial public offerings.

“One significant trend this year was investors getting more interested in markets beyond China. These markets are busier than they have been historically,” said William Smiley, co-head of equity capital markets in Asia ex-Japan at

Goldman Sachs Group Inc.

Chinese, South Korean and Indian companies generated the most number of large listings in the Asia-Pacific region this year, according to Dealogic data. The figures exclude listings in Japan, often viewed by investors as a distinct market, and mainland China’s onshore A-share market, where new share sales aren’t easily accessible by foreign investors.

While China still led the pack with 15 IPOs of $500 million or more, the performance of these stocks has been underwhelming, dropping more than 35% on average as of Dec. 28, according to Dealogic data. Short-video streaming platform

Kuaishou Technology,

which raised $6.2 billion in February in the Hong Kong stock exchange in the region’s biggest IPO this year, was recently down about 40% from its IPO price.

In contrast, South Korean and Indian IPOs have seen handsome returns on average, at 42% and 23%, respectively, according to Dealogic data. Those figures are despite a few high-profile misfires, such as the listing of

One97 Communications Ltd.

, the parent company of Indian fintech giant Paytm.

Among the region’s top 10 best-performing big IPOs, five are from South Korea and three are from India. Vaccine developer

SK Bioscience Co.

and fintech player

Kakaopay Corp.

, which are both from South Korea, and Indian delivery platform

Zomato Ltd.

are among the top gainers.

The trend is set to continue, as more unicorns—private companies valued at more than $1 billion—in these markets become ready to go public, bankers and investors say. Some banks are adapting in response.

“While we continue to be very long China, we have adjusted resources to capture opportunities in other markets in the region, which could continue to be bright spots for us next year,” said Selina Cheung, co-head of equity capital markets, Asia, at UBS Group AG.

Short-video streaming platform Kuaishou Technology raised $6.2 billion in Hong Kong in the region’s biggest IPO in 2021.



Photo:

Roy Liu/Bloomberg News

“What will be different for at least the first half of next year is some investors will pay increasing attention to other parts of Asia,” she said.

India will also see a large pipeline of new issues by unicorns, according to Mr. Smiley at Goldman.

Nasdaq Inc.,

which rode a boom of Chinese IPOs for the past decade, now expects a jump in Southeast Asian companies making a debut on the exchange next year, according to Asia-Pacific Chairman

Robert McCooey.

“It is an amazingly large total addressable market,” he said, referring to the customer base that these businesses can tap in Southeast Asia. “Companies have been being built there for years.”

That could, over time, help offset the effects of the delistings of American depositary receipts of Chinese stocks and the drying up of new U.S. listings by Chinese companies, Mr. McCooey said.

The clock has recently started ticking on rules that will lead U.S.-listed Chinese companies to be kicked off American exchanges if they fail to turn over their audit working papers for U.S. inspection for three years in a row. Both countries have also imposed more scrutiny on U.S. IPOs by Chinese companies this year.

Didi Global Inc.,

the largest Chinese IPO in the U.S. this year, was punished for front-running Beijing’s directives and listing in New York. The ride-hailing giant has started working on a plan to list its shares in Hong Kong and delist its ADRs in the U.S. Its shares slid to new lows this week, and are more than 60% below their IPO price.

Chinese tech stocks popular among U.S. investors have tumbled amid the country’s regulatory crackdown on technology firms. WSJ explains some of the new risks investors face when buying shares of companies like Didi or Tencent. Photo Composite: Michelle Inez Simon

For some investors, Chinese IPOs were already a hard sell even without the regulatory uncertainty. A slowdown in China’s economic growth and tough competition have made them pass over large tech IPOs.

“Too crowded, too hot,” Ning Meng, asset manager Neuberger Berman Group LLC’s China A-Share strategy leader, said of tech IPOs on the Hong Kong exchange last year.

Investors and bankers still hope new listings of Chinese companies will resume in the new year in Hong Kong, after the regulatory storm blows over.

“Some investors are taking a short pause to see how regulations evolve,” said Ms. Cheung, who is also the regional head of private financing markets for UBS. “But they can’t completely ignore China.”

Write to Jing Yang at Jing.Yang@wsj.com and Dave Sebastian at dave.sebastian@wsj.com

Copyright ©2021 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

As Chinese IPOs Stumble, Investors Look Elsewhere in Asia Source link As Chinese IPOs Stumble, Investors Look Elsewhere in Asia

The post As Chinese IPOs Stumble, Investors Look Elsewhere in Asia appeared first on Eminetra.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Share post:

Popular

More like this
Related

Here’s Where Half of Shiba Eternity Profits Will Go

The Shiba Inu team has big plans for...

Upgrade or not, THETA’s fortunes have investors still waiting – Here’s why

Theta Network recently took a step forward towards the...

Bill Maher’s Liberal Audience Applauds When He Suggests Biden Dump Kamala Harris In 2024 (VIDEO)

This weekend on his show, Bill Maher suggested that...

The most expensive homes sold in Roseville last week

The Roseville home, which sold for $949,000, topped last...