Initial public offerings (IPOs) in emerging nations are returning about 15 times more than IPOs in developed countries even as companies from China to Brazil flood the market with more shares than ever.
Listings by Longfor Properties Co, Banco Santander (Brasil) SA and Kuala Lumpur-based Maxis Bhd helped raise $39 billion in emerging markets during the three months ending today. That outstrips the amount sold in IPOs from 23 industrialised nations by $21.3 billion, the biggest gap since at least 2000.
Offerings by Chinese property companies, banks in Brazil and Malaysian mobile-phone providers have enticed investors as the MSCI Emerging Markets Index almost doubled from its 2009 low and economic growth outpaces the US, Europe and Japan.
While IPOs in developing markets rose 21 per cent and offerings in mainland China rallied 88 per cent in the past three months, the “avalanche” of sales may help spur a 20 per cent drop in share prices, according to Mark Mobius.
“Investors are a lot more confident about emerging markets than they are in developed markets,” said Shane Oliver, head of investment strategy at Sydney-based AMP Capital Investors, which oversees about $89 billion globally. “Investors realise that the growth potential is in the emerging world.”
China Minsheng
AMP bought Evergrande Real Estate Group, a Guangzhou- based real-estate developer, its initial Hong Kong share sale on October 29, and China Minsheng Banking Corp, the nation’s first privately owned lender, when it offered stock this month in the largest public sale of equity in Hong Kong since April 2007.
Minsheng, which already traded in Shanghai, had the worst Hong Kong debut among the seven Chinese lenders that sold shares in the territory since June 2005, dropping 3.1 per cent on November 26.
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The Beijing-based bank’s retreat came nine days after Shenzhen-based brokerage China Merchants Securities Co posted the smallest first-day gain among companies listing on exchanges in mainland China this year.
Thirty-seven companies from the nations in the MSCI Emerging Markets Index have sold shares in public offerings this month, bringing the numbers of IPOs since September to 149.
The sales have been propelled by a 98 per cent rally in MSCI’s gauge of developing countries since March 2.
‘In the pipeline’
The surge in offerings will put “downward pressure” on prices, according to Mobius, who oversees about $25 billion of developing-nation assets at Templeton Asset Management.
The MSCI Emerging Markets Index slid 2.5 per cent last week, the first decline in a month, as Dubai’s attempt to delay debt repayment unnerved investors.
“I’ve been cautious because I’ve felt that there will be a significant correction,” Mobius said from Hanoi in a Bloomberg Television interview on November 27.
“With these IPOs in the pipeline, that will tend to suppress the emerging markets.”
Sands China, the Macau casino operator that raised HK$19.4 billion ($2.5 billion) in the world’s second-largest IPO of November, slid as much as 15 per cent in its first day of trading in Hong Kong today as the possible default of Dubai World hurt investor sentiment toward tourism-related companies.
The unit of Las Vegas Sands Corp controlled by billionaire Sheldon Adelson sold 1.87 billion shares at HK$10.38 each on November 21 after seeking as much as HK$13.88, a price that would have given Sands China a higher valuation than any casino resort in the world.
Hochtief, Great Depression
No US IPOs are scheduled until December 9, as the pace of offerings slows after the Thanksgiving holiday.
Essen, Germany-based Hochtief AG, the country’s biggest construction company, will sell shares in Hochtief Concessions AG, its unit that manages airports and roads, to raise as much as 1 billion euros ($1.5 billion) this week.