Asia’s Anticipated IPO Wave

Published on17 JUN 2021

The article below is from our BRIEFINGS newsletter of 17 June 2021

At Goldman Sachs’ annual TechNet Conference, senior leaders from the firm’s Investment Banking and Financing business in the Asia-Pacific region discussed what's driving the recent surge in capital markets activity. Philippa Vizzone moderated a conversation with Aaron Arth, Raghav Maliah and Jung Min on the outlook for corporate activity in the region. Below are excerpts from their conversation.

Raghav Maliah: The pace of digitization significantly accelerated during the pandemic. Things that we were expecting to happen a couple of years down the road are all happening now. In general, technology has helped the world cope and live life in a more normal way. And over time, it's also changing behaviors.

Jung Min: It wasn’t that long ago that we were talking about why companies were staying private for longer and continuing to grow in size as private companies. Interestingly, it seems that with COVID and the acceleration in the digitization of fundamental technologies, we’ve seen a wave of private companies decide it was the right time to go public. We actually started to see this in the Asia-Pacific region first, starting last August, and it’s been an incredibly busy period since then.

Philippa Vizzone: Aaron, as head of financing for the region, can you describe its state of financing at a time when we’ve seen a blistering pace of companies going public? What has the appetite been like for listings and follow-on offerings?

Aaron Arth: We’re seeing increased liquidity in the markets and that’s provided a strong base for companies to raise capital and fund the growth they need in the region. As a result, we’re seeing companies raise capital at a breakneck pace. For example, year-to-date issuance has already surpassed the full-year volumes for 11 of the last 15 years. While companies in the TMT sector have been particularly active, we’re seeing activity across sectors and platforms, as well as record volumes of issuance in the secondary market across primary or convertible securities.

Philippa Vizzone: Given this strong base of capital raising, what do you expect to see on the horizon for China in the next 12 months?

Raghav Maliah: Over the next few years, we expect to see 300 to 400 companies in Asia go public. And to be clear, these aren’t startups, but developed, high-quality businesses with strong fundamentals that are expected to be profitable, having already benefited from available private capital. To be sure, we’re seeing a little bit of indigestion right now with markets in Asia falling more recently and rising concerns over inflation, but we remain optimistic.

Aaron Arth: While it’s true that we’re probably getting a bit of pushback from the market, given the record levels of issuance, if you take a step back and look at what’s actually going on, the type of companies coming to market are well established. This is a crucial and differentiating factor. During the tech bubble in the late 1990s and early 2000s, startups were often just adding a “dot-com” to their names and going public in a market that was euphoric. Today, there’s a strong set of corporates coming into the market with an enormous amount of capital—and importantly global capital—that’s available for the region. These are companies that should be going public. So we believe this is just the next stage of maturation in this region for companies, particularly those in and around tech.

Philippa Vizzone: Just to widen our perspectives, can you describe some of the opportunities in India and the Southeast Asia markets?

Jung Min: We’ve seen growing investor interest in those markets in recent years. While China is clearly the biggest geographic market in the region, Southeast Asia and Korea are garnering more attention as companies show that they’re able to scale beyond their borders. And we think we’ll soon see multibillion-dollar companies in Indonesia and Southeast Asia. In India, we see a large pipeline of private companies that have been able to grow tremendously because of the availability of private capital that’s been growing in India over the last five to 10 years. And at some point, we’re going to see those companies tap the public markets.

Philippa Vizzone: And what would be the catalyst for these companies to tap the public markets?

Aaron Arth: We’ve seen how the access to global, not just local, capital has spurred companies in China to go public, and we expect this global capital will be a key catalyst in these markets, as well. In particular, India has been an isolated market for some time with a lot of local capital driving the market. Today, there’s greater scale in the amount of capital that’s being raised. And that capital creates greater liquidity. There’s always been an interest in these markets, but the question was: How do you invest in these markets with some safety and security with liquidity behind it? Now investors have a lot more comfort in entering these markets.



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