Emerging market groups hungry for IPO cash to fund expansion
Tuesday, 22 July 2008
David Oakley and Rachel Morarjee
Emerging market companies are raising the lion's share of cash on the world's equity markets as they seek money for expansion in spite of the deteriorating financial and economic conditions.
These companies accounted for 70 per cent of the value of global initial public offerings (IPOs) since April 1 compared with 45 per cent over the same period last year before the credit crunch hit issuance from western-based operations, according to Dealogic, the data provider.
The volumes of companies from the developing nations are still much lower than they were before last summer's crisis.
The number of emerging market IPO issuance fell 45 per cent in the second quarter compared with the same period last year. However, this compares with a fall of 65 per cent in IPO issuance of companies based in the developed world.
Michael Lavelle, co-head of capital markets at Citigroup, said: "IPOs will continue for companies in growth sectors and markets. In many emerging markets, the economies are still expanding rapidly, as are the earnings for the companies based there. This is why the majority of IPOs this year are coming from the emerging markets."
OGX, the Brazilian oil and gas company, priced the biggest emerging market IPO this year, raising $4.1bn last month. Latin America continues to grow strongly on the back of soaring commodity prices as countries rich in resources remain relatively sheltered from the financial shocks.
Matthew Koder, joint head of global capital markets at UBS, said: "The themes that dominate are clearly resource related."
Other notable IPOs from Latin America included a $1.7bn deal from Fresnilo, the world's largest silver producer, which became the first Mexican company to launch such a deal on the London Stock Exchange in May.
Asia saw some big IPOs as this part of the world continues to grow strongly, too, in spite of big falls in many stock markets there. Big deals included a $2.6bn deal from Reliance Power, the Indian power company, in January, and a $2.5bn deal from China Railway Construction in May.
Among the other big deals, New World Resources, which owns four Czech coal and mining companies, priced a $2.5bn IPO in May.
Bankers say the pipeline for emerging market IPOs is strong, with a large number of deals expected over the next two months.
In the first quarter, the biggest IPO of the year from Visa, the US credit and debit card company, distorted the numbers with emerging market companies making up only 28 per cent of the deals. However, with the $19.6bn Visa IPO stripped out of the data, emerging market companies made up 60 per cent of issuance in line with the trend of a larger deal volume out of the developing world.
................................
Under syndication
arrangement with the FE
Emerging market companies are raising the lion's share of cash on the world's equity markets as they seek money for expansion in spite of the deteriorating financial and economic conditions.
These companies accounted for 70 per cent of the value of global initial public offerings (IPOs) since April 1 compared with 45 per cent over the same period last year before the credit crunch hit issuance from western-based operations, according to Dealogic, the data provider.
The volumes of companies from the developing nations are still much lower than they were before last summer's crisis.
The number of emerging market IPO issuance fell 45 per cent in the second quarter compared with the same period last year. However, this compares with a fall of 65 per cent in IPO issuance of companies based in the developed world.
Michael Lavelle, co-head of capital markets at Citigroup, said: "IPOs will continue for companies in growth sectors and markets. In many emerging markets, the economies are still expanding rapidly, as are the earnings for the companies based there. This is why the majority of IPOs this year are coming from the emerging markets."
OGX, the Brazilian oil and gas company, priced the biggest emerging market IPO this year, raising $4.1bn last month. Latin America continues to grow strongly on the back of soaring commodity prices as countries rich in resources remain relatively sheltered from the financial shocks.
Matthew Koder, joint head of global capital markets at UBS, said: "The themes that dominate are clearly resource related."
Other notable IPOs from Latin America included a $1.7bn deal from Fresnilo, the world's largest silver producer, which became the first Mexican company to launch such a deal on the London Stock Exchange in May.
Asia saw some big IPOs as this part of the world continues to grow strongly, too, in spite of big falls in many stock markets there. Big deals included a $2.6bn deal from Reliance Power, the Indian power company, in January, and a $2.5bn deal from China Railway Construction in May.
Among the other big deals, New World Resources, which owns four Czech coal and mining companies, priced a $2.5bn IPO in May.
Bankers say the pipeline for emerging market IPOs is strong, with a large number of deals expected over the next two months.
In the first quarter, the biggest IPO of the year from Visa, the US credit and debit card company, distorted the numbers with emerging market companies making up only 28 per cent of the deals. However, with the $19.6bn Visa IPO stripped out of the data, emerging market companies made up 60 per cent of issuance in line with the trend of a larger deal volume out of the developing world.
................................
Under syndication
arrangement with the FE