The U.S. share sinks to an all-time-low of 11 percent while India, China, and Malaysia roll out myriad initial public offerings
Initial public offerings in Asia have reached record levels as companies flood the market with equity, reducing the global share of U.S. IPOs to an all-time low. And Asia's total is set to climb as Jiangsu Rongsheng Heavy Industry Group of China, Petronas Chemicals Group of Malaysia, and Australian coal train operator QR National prepare to sell more than $10 billion of shares as soon as this month, adding to the $134 billion raised in Asia in 2010 as of Oct. 25, data compiled by Bloomberg show.
The world's fastest economic growth and record low bond yields will likely boost demand for Asian IPOs as American companies recover from the longest recession since the Great Depression, according to Deltec Asset Management. Asia's share of initial offerings has increased to 66 percent from 12 percent in 1999. Chinese IPOs led the increase, attracting $76 billion this year. The amount raised by U.S. IPOs has declined 75 percent in the same span and now accounts for 11 percent of money raised globally, according to data compiled by Bloomberg. Agricultural Bank of China sold $22.1 billion of shares in Shanghai and Hong Kong last quarter in the world's biggest IPO on record. Six other Chinese offerings have already raised $1 billion this year. In the U.S. in 2010, no company has raised more than $700 million, and at least 54 companies have postponed or withdrawn IPOs.
IPOs in India are on pace to eclipse the country's all-time high of $8.2 billion in 2007, led by Coal India's record sale in October. The government raised $3.4 billion selling a 10 percent stake in the company after investors bid for more than 15 times the shares available. Coal India was the first of eight sales the government plans by March, Disinvestment Secretary Sumit Bose said on Oct. 19.
Asia "is an environment ripe for raising capital and ripe for investing," says Joseph G. Carson, a New York-based economist who helps oversee AllianceBernstein's (AB) $1.2 billion Global Thematic Growth Fund (ALTFX). "It's based on expectations of strong growth." SKS Microfinance, the Hyderabad (India)-based lender backed by billionaire George Soros that raised $353 million in an IPO in August, may increase revenue 52 percent next year. That's almost four times the average growth rate for the 30 companies in the Sensitive Index, the benchmark gauge for Indian equity, and about nine times faster than the average 6 percent increase for U.S. companies.
People who invest in new Asian issues have seen impressive gains so far this year. The newly public Asian companies climbed 36 percent on average as of Oct. 25, data compiled by Bloomberg show. Companies from China and India account for 6 of the 10 best-performing IPOs on U.S. exchanges this year. MakeMyTrip, India's largest online travel company, has increased 173 percent, while JinkoSolar Holding (JKS), a maker of silicon wafers in China's Jiangxi province, gained 155 percent. The Standard & Poor's 500-stock index and the MSCI Asia-Pacific Index have both advanced less than 7 percent this year.
"What the market needs and wants is a lot more IPOs coming out of China," says Jeffrey A. Urbina, who oversees emerging-market strategy at Chicago-based William Blair. "That's where the growth is."
The bottom line: Companies in China, India, and other fast-growing Asian nations are completing IPOs as investors clamor for their shares.