Asia raised more than $100 billion from capital market deals in 2019, with more than $40 billion raised in the fourth quarter, largely on account of Alibaba’s $13 billion secondary listing. At the beginning of 2020, banks were expecting similar deal flows for the year.
With the sudden outbreak of the novel coronavirus from China and fears over its spread, Asia’s financial hub offices are partially empty - many investment bankers or asset managers are not required at their desks, while regional governments have also begun severely limiting travel in and out of China.
The precaution is beginning to emanate for corporate executives. InnoCare Pharma, which develops treatments for autoimmune diseases and looking to raise near $200 million, reportedly plans to delay investor meetings for a Hong Kong listing. Trans-cab Holdings, Singapore’s second largest taxi company, postponed its second attempt to go public. Hong Kong Exchanges and Clearing is now considering allowing companies affected by the outbreak to extend reporting deadlines or published unaudited earnings.
But even amid the precaution, banks do not yet expect much change for an IPO pipeline that includes Yum China Holdings and Mongolia's state-owned coal miner Erdenes Tavan Tolgoi JSC – at least in China. “We haven’t seen any company delay their IPO yet,” one Beijing-based investment banker told FinanceAsia. “We are not sure yet about the long-term impact but the IPO in the first quarter won’t be affected that much.”
This confidence may be down to filing, as companies looking to list in early 2020 have already included earnings from 2019. “The virus impact on companies earnings will only be shown in later financial reports, that might affect when companies choose to go for IPO later this year,” the investment banker said.
INFECTED INDUSTRIES
The virus’ spread is expected to mainly affect industries such as transportation, hotels, and catering business, but the investments, import and export, and commodities price will bounce back after the epidemic is over, according to China Renaissance who released a report on February 2. China Renaissance also noted it is not aware of any IPO delays.
So far, January has proved buoyant to say the least. The total deal value of Asia Pacific-based IPOs in January 2020 reached $7.9 billion, a three-fold increase from the previous year, according to Dealogic data. In fact, transportation topped every industry in terms of total IPO deal value in January.
Source: Dealogic
But a slowdown in Hong Kong would be significant to Asia; it made up 65% of the $100 billion worth of deals in 2019. Southeast Asia could be an indirect beneficiary as investors look for companies with strong domestic market share in ASEAN and limited exposure to the new coronavirus.
But would airlines, for example, be as lucky? Indonesia’s carrier Lion Air, who is eyeing to raise close to $1 billion, canceled more than 50 flights to China in February already. Investors may not be interested in buying shares in airline companies amid the travel restrictions.
Year to date the ASEAN deal pipeline is still active. In Thailand, Central Retail is about raise more than $2 billion while in Singapore CapitaLand Commercial Trust and CapitaLand Mall Trust a proposed merge in a $6 billion deal. Thai Bev’s beer business is expected to raise more than $2 billion in Singapore.
CHINESE RESOLVE
For their part, Chinese companies are trying not to be beaten by the situation. Wuhan-based Bestore, a company selling dry fruits and snacks said they would not delay their roadshow which was scheduled on February 11. Allmed Medical Products, a Shenzhen-listed medical supply manufacturer based in Hubei province, said they are trying to resume operation as fast as possible after Chinese New Year to cope with the virus outbreak.
The novel coronavirus is unlikely to be the single factor, but it may now form part of the discussion as to why companies may stay private longer.
Following the debut of WeWork, investors were pulling back unicorn valuations, at the end of last year, demanding to see early green shoots of profitability. OneConnect Financial Technology, backed by PingAn and Softbank, began trading at $4.7 billion, after Softbank had valued the company at $7.5 billion. Bitcoin mining gear maker Canaan witnessed a third of its market cap slip after listing.
