JD.com IPO [Source: IFR]

Is another lucky day that I have IFR coming to my inbox: Here you go.

JD.com, China’s second-largest e-commerce company, is preliminarily planning to bring its US IPO to the market in April, according to sources familiar with the situation.

The plan is to wrap up the listing in May, said sources.

The company, the main competitor of China’s e-commerce giant Alibaba Group, filed a US$1.5bn IPO with the Securities and Exchange Commission last Thursday on either the New York Stock Exchange or Nasdaq.

Based on JD.com’s current listing timetable, the deal may come slightly earlier than that of Alibaba if the Hong Kong Exchanges and Clearing issues a consultation paper regarding the shareholding structure of listed companies in the first quarter.

This is crucial to Alibaba, as the company had expressed publicly that it wanted to keep a shareholder structure that allowed a group of top managers and founders to nominate and control the board.

Assuming HKEx issues the consultation paper in March and the consultation conclusion in May, Alibaba’s deal is likely to come in June at the earliest.

Compared with the US, Hong Kong has much fewer options on shareholding structures. For instance, the dual-class share structure that JD.com adopted is not allowed in Hong Kong.

Bank of America Merrill Lynch and UBS are leads on the JD.com IPO.

Hong Kong investors are set to get their first taste of China’s auction services business and theme park industry next week as bankers begin gauging demand for two mainland companies. 

Chinese auction house Poly Culture plans to start pre-marketing its proposed Hong Kong IPO of about US$300m on February 11. A roadshow is scheduled to begin on February 20.

Poly Culture, which also runs cinemas, museums and invests in films, is a subsidiary of state-owned Poly Group.

Citic Securities International is the sponsor for the transaction, and CLSA is the sole bookrunner.

Meanwhile, Dalian Haichang Group, a theme-park operator in China, is looking to begin pre-marketing on February 10 ahead of a proposed Hong Kong IPO of US$250m–$300m.

Haichang operates seven theme parks in cities, including Dalian, Tsingtao, Tianjin, Wuhan and Chongqing.

As there were no similar companies listed in Hong Kong and South-East Asia, bankers close to the float said the valuation of the deal would most likely be benchmarked against listed comparables in the US. 

BNP Paribas and Bank of America Merrill Lynch are leading the Haichang IPO.

The Indian Government has fixed the price range for its Rs4.9bn–Rs5.1bn (US$79m–$82m) secondary follow-on offer in Engineers India at Rs145–Rs150.

The government is selling 33.69m shares, or a 10% stake. The offer opens on February 6 and closes on February 10. A discount of Rs6 per share will be given to retail investors and employees of the company.

Engineers India shares closed at Rs150.70 on Tuesday.

ICICI Securities, IDFC and Kotak Mahindra Capital are the lead managers.

The Indian government is targeting to launch the IPO of state-owned Hindustan Aeronautics before the end of the financial year on March 31.

The size is yet to be decided and could be smaller than the US$200m that was targeted a couple of years ago when the issue was first proposed. HAL, owned by the Ministry of Defence, will be selling the shares to domestic investors only. The government plans to sell 10% from its 100% stake.

Barclays, Axis Securities, Goldman Sachs and SBI Capital are the bookrunners.

India’s GMR Infrastructure has received board approval to raise up to Rs25bn (US$400m) from an issue of foreign currency convertible bonds or other securities.

There were no offshore convertible bonds issued by Indian companies last year, as sharp movements in the rupee made them a risky proposition and there were few high-quality companies interested in issuing.

The last Indian issuer to sound investors over a convertible bond issue was Reliance Infrastructure, which had also targeted Rs25bn. After sounding investors in October, there was insufficient demand to launch a deal. Given that the two companies are peers, that could mean that the bookrunners for GMR Infra will need to offer some structural features like asset swap to make foreign investors comfortable.

Pipeline

•February 19–25 – Kobe Steel (Japan) Around US$840m follow-on. GS, Mizuho, MS, Nomura, SMBC Nikko

•February 2014 – Poly Culture (China) Up to US$300m SEHK IPO. CLSA

•February 2014 – Dalian Haichang Group (China) Up to US$300m SEHK IPO. BNP Paribas, BofA Merrill

•Q1 2014 – 8990 Holdings (Philippines) Around US$250m follow-on. CIMB, SB Capital

•Q1 2014 – Akara Resources (Thailand) US$500m IPO. CIMB, Macquarie, Maybank, MS

•Q1 2014 – L&T Infrastructure Development Projects (India) US$600m–$700m SGX business trust IPO. DB, JPM, Nomura, StanChart

•Q1 2014 – 7-Eleven Malaysia (Malaysia) Up to US$250m IPO. Maybank, UBS, CLSA, CIMB

•Q1 2014 – Lotte Shopping REIT (South Korea) Up to US$1bn SGX REIT IPO. DBS, GS, Nomura, StanChart

•Q1 2014 – AAB Group (China) Up to US$300m IPO. BofA Merrill, RafAello Capital, UBS

•Q1 2014 – Harbin Bank (China) US$1bn SEHK IPO. ABCI, BOCI, CICC, BoCom, CMS, CMB, CIMB, CS, DBS, Haitong

•Q1 2014 – Sunshine100 Real Estate Group (China) US$300m IPO. CICC, Citi

•May 2014 – JD.com (China) US$1.5bn US IPO. BofA Merrill, UBS

•Q2 2014 – Tianhe Chemicals (China) Up to US$1bn SEHK IPO. GS, MS, CLSA, DB, HSBC

•Q2 2014 – BAIC Motor (China) Up to US$2bn SEHK IPO. GS, MS, UBS

•H1 2014 – China Grand Automotive Services (China) US$500m–$1bn SEHK IPO. CICC, GS

•H1 2014 – Jasmine International Infrastructure Trust (Thailand) US$1.6bn–$2.2bn business trust IPO. Bualuang, MS

• H1 2014 – WH Group (China) US$5bn–$6bn SEHK IPO. BOCI, Citic, DBS, GS, MS, StanChart, UBS 

•H1 2014 – Icon Offshore (Malaysia) Up to US$300m IPO. BNPP, CS, Maybank

•H1 2014 – State Bank of India (India) US$1.5bn primary follow-on. Citi, JM Financial, JPM

•H1 2014 – Axis Bank (India) US$850m secondary follow-on. BofA Merrill, Citi, DB, HSBC, JPM, UBS

•H2 2014 – Malakoff Corp (Malaysia) Up to US$1bn IPO. CIMB, CS, JPM, Maybank, BofA Merrill, DB, HSBC, MS, Nomura, RHB

•H2 2014 – Hong Kong Airlines (Hong Kong) Up to US$800m IPO. BOCI, JPM, MS, StanChart

•2014 – Japan Display (Japan) US$2bn IPO.

•2014 – Sincere Group (China) Up to US$350m SEHK IPO. MS

•2014 – Jinhui China (China) Up to US$400m SEHK IPO. BofA Merrill

•2014 – Golden Mountain (China) Up to US$200m SEHK IPO. Citi

•2014 – Jinhua Concrete Pile Group (China) Up to US$200m SEHK IPO. Citic, MS, StanChart

•2014 – Asia Potash Group (Laos) US$500m SEHK IPO. BofA Merrill, Citi, DB

•2014 – Triplex (China) Up to US$200m SEHK IPO. BofA Merrill, CMS, GS

•2014 – Bangkok Airways (Thailand) US$200m–$300m IPO. Bualuang, Citi, CS, DBS

•2014 – Fuhua Agricultural Technology (China) Up to US$200m SEHK IPO. Citi, Jefferies

•2014 – ACB India (India) US$150m IPO. Edelweiss, IDFC, JPM, Macquarie, Axis, ICICI, Yes

•2014 – Mando China (China) US$250m SEHK IPO. DB, MS

•2014 – Mytrah Energy Trust (India) US$400m–$500m SGX business trust IPO. MS, StanChart

•2014 – South Beauty (China) Up to US$200m SEHK IPO. CICC, DB, UBS

•2014 – Century Energy (China) US$150m SEHK IPO. BNPP, ICBCI, MS

•2014 – Golden Bridge United Financial Leasing (China) Up to US$300m SEHK IPO. BoCom, JPM

•2014 – China Railway Material (China) Up to US$2bn A/H IPO. CICC, Citic Securities, UBS, Citi, CS, HSBC

•2014 – Rashtriya Ispat Nigam (India) Around US$450m IPO. Deutsche, UBS

•2014 – Altain Khuder (Mongolia) US$300m SEHK IPO. BofA Merrill, Macquarie

•2014 – Hankook Silicon (South Korea) Up to US$371m IPO. Daewoo, Daishin, Woori

•2014 – China Shipping Nauticgreen (China) Up to US$190m SEHK IPO. DB, CMS

•2014 – Cathay Industrial Biotech (China) Up to US$100m Nasdaq IPO. DB, Jefferies, MS

•2014 – Zhong Da Mining (China) Up to US$350m SEHK IPO. CCBI, HSBC, UBS

•2014 – Hunan Zhonghe Energy (China) Up to US$600m SEHK IPO. Citi, CS

•2014 – Longjiang Bank (China) Up to US$500m HK IPO. BofA Merrill, Nomura

•2014 – Harita Jayaraya (Indonesia) US$250m SGX IPO. Citi, DBS, CICC

•2014 – 360buy.com (China) Up to US$3bn US IPO

•2014 – Newmont Nusa Tenggara (Indonesia) US$500m IPO. BNPP, UBS

•2014 – The Basic House Global (China) US$200m–$300m SEHK IPO. GS, UBS

•2014 – Sembawang E&C (Singapore) US$150m IPO. CIMB, Nomura, StanChart

•2014 – China Network Systems (Taiwan) US$1bn SGX business trust IPO. Citi, DBS, GS, MS, StanChart

•2014 – Bank of Shanghai (China) US$2bn A/H IPO. Guotai Junan, Citic, GS Gao Hua; ICBCI, JPM, MS, UBS

•2014 – China Guangfa Bank (China) US$5bn A/H IPO.BofA Merrill, Citi, DB,GS, CS, Macquarie, Citic, Guangfa, GS GaoHua, Haitong, Yingda

•2014 – LG Siltron (South Korea) Up to US$450m IPO. Tong Yang, UBS, Woori

•2014 – Posh Semco (Singapore) US$300m IPO. BofA Merrill, DBS, OCBC

•2014 – Hyundai Oilbank (South Korea) Up to US$2bn IPO. Citi, Woori, BofA Merrill, Daewoo, Hana Daetoo, Shinhan

•2014 – NW Hotel Investments (Hong Kong) US$800m SEHK IPO. DB, HSBC, JPM,BOCI, StanChart

•2014 – Dyviacom Intrabumi (Indonesia) US$300m–$500m re-IPO. DB, CIMB, CS, Buana

•2014 – Indonesia Air Asia (Indonesia) US$200m IPO.CIMB, CS

•2014 – ILFS (India) US$400m SGX business trust IPO. DB, JPM, Nomura, CIMB

•2014 – Iskander Waterfront (Malaysia) Around US$300m IPO. CIMB, DB, JPM, RHB

•2014 – SMC Global Power Holdings (Philippines) Ps27.3bn (US$619m). CIMB, StanChart, UBS, ATR Kim Eng, SB Capital

•2014 – China National Biotec Group (China) Up to US$2bn SEHK IPO. CICC, MS, UBS

•2014 – Energy Australia (Australia) US$3bn IPO. BofA Merrill, Deutsche, UBS

•2014 – Blue Bird Taxi (Indonesia) Up to US$320m IPO. CS, Danareksa, UBS, CIMB

•2014 – Keppel T&T Data Centre REIT (Singapore) Up to US$300m REIT IPO. CS, DBS, StanChart, DB, GS

•2014 – China CNR Corp (China) Up to US$1.5bn SEHK IPO. CICC, Macquarie, MS, UBS

•2014 – Seibu Holdings (Japan) IPO. Mizuho, UBS, BofA Merrill

H2 2014 – Line (Japan) Around US$2bn US IPO. GS, JPM, MS

Hong Kong Lures New York IPOs After China Auditors Ban

By Jonathan Browning, Belinda Cao and Fox Hu Jan 27, 2014 10:30 AM GMT+0800

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The U.S. ban on Chinese affiliates of the four biggest accounting firms stands to undermine a pickup in initial share sales by Chinese companies in New York.

While the auditors said they’ll appeal the six-month ban imposed by a U.S. judge, the ruling will probably push Chinese companies to opt for a listing in Hong Kong instead of New York, said Bruno del Ama, chief executive officer of Global X Funds.

Chinese companies had begun lining up to sell in New York this year after eight initial public offerings were carried out in 2013, up from three the year before. Beijing Jingdong Trading Co. and Zhaopin Ltd. wanted to go public in the world’s biggest stock market, people familiar with the matter said this month. Alibaba Group Holding Ltd., China’s largest e-commerce company, said in November that it’s deciding whether to sell shares in the U.S. or Hong Kong.

“Some of the sexiness of IPOs in the U.S. may be going away because of some of the perception issues,” del Alma, who helps manage $2.8 billion in exchange-traded funds, said in an interview at Bloomberg’s headquarters in New York Jan. 24. “When you think about it, five years ago technology companies were looking at an IPO in Nasdaq because that’s the global technology exchange. Then all of sudden these accounting issues started to come up.”

The Bloomberg China-US Equity Index of the most-traded Chinese stocks in New York dropped 4.3 percent last week, the biggest slump in three months, after the U.S. Securities & Exchange Commission barred the four largest accounting firms from conducting audits of New York-listed companies. The Hang Seng China Enterprises Index of mainland Chinese stocks listed in Hong Kong sank 2.6 percent by 10:24 a.m. local time today.

Lower Valuations

The decision to ban the affiliates of the largest accounting firms for six months “ignored” China’s efforts and progress made on cross-border rules cooperation, the nation’s securities regulator said on Jan. 24 on its microblog. Deloitte Touche Tohmatsu CPA Ltd., PricewaterhouseCoopers Zhong Tian CPAs Ltd., Ernst & Young Hua Ming LLP and KPMG Huazhen have 21 days to file a so-called petition for review with the SEC before the Jan. 22 ruling would become final.

The SEC ruling could also mean lower valuations for the IPOs, said Bao Fan, chief executive officer of technology-focused boutique investment bank China Renaissance.

“The one thing investors dislike most is uncertainty and that uncertainty will be priced in,” Bao said in an interview. “It is the companies, the issuers, that are going to pay the price.”

China Renaissance advised Qunar Cayman Islands Ltd. (QUNR) and Sungy Mobile Ltd. on their U.S. initial share sales last year.

Caught in ‘Crossfire’

Underscoring investor skittishness, all but one of the Chinese companies that listed in the U.S. in 2013 fell Jan. 23. Sungy Mobile Ltd., which runs a Chinese mobile web portal, tumbled 9.7 percent, while online sports-lottery operator 500.com Ltd. dropped 10 percent.

The firms receiving the bans said in an e-mailed statement Jan. 22 that they will appeal the decision by U.S. Administrative Law Judge Cameron Elliot.

“The companies are getting caught in the crossfire of the SEC and the Chinese government,” Jay Ritter, a finance professor at the University of Florida at Gainesville, who studies IPOs, said by phone. “The most appealing option for the handful of Chinese companies that were planning on listing in the U.S. in the next six months will be to postpone until the ban ends.”

Elliott ordered the ban after the accounting firms’ Chinese units failed to comply with SEC orders for documents needed for a series of accounting fraud probes.

Muddy Waters

IPOs by Chinese companies started gathering pace in mid-2013 after a two-year lull sparked by accounting frauds at Sino-Forest Corp., a Chinese plantation company listed in Canada that was accused by short-selling firm Muddy Waters LLC in 2011 of overstating its timber holdings.

Muddy Waters said NQ Mobile Inc., a Chinese mobile-security service provider, inflated sales in a October report. Beijing-based NQ Mobile has denied the allegations and set up an independent committee to review the report.

Optimism about surging e-commerce in the world’s most populous nation helped reignite investor interest in Chinese IPOs. Even after last week’s decline, the Chinese companies that went public in the U.S. last year have almost doubled from their offer prices on average, data compiled by Bloomberg show.

Alibaba Offering

Alibaba, based in Hangzhou, hasn’t decided when and where to sell shares, an external spokesman for the company said by phone Nov. 20 after a Nikkei newspaper report cited the company’s founder Jack Ma as saying he preferred having an initial public offering in Hong Kong as early as this year.

The value of such deals is poised to jump again this year, as online retailer Jingdong plans to raise about $2 billion, people with knowledge of the matter said. Zhaopin is preparing an IPO of roughly $200 million as early as in the first half, people familiar with that deal said.

Four Chinese companies currently have documents on file to go public in the U.S., according to data compiled by Bloomberg. They are Anpulo Food Inc., WINHA International Group Ltd., Pacificorp International Hotel Management Inc. and Vesta International Corp., the data shows.

 

IPO surge sets up bright 2014 for Hong Kong

Jasper Moiseiwitsch jasper.moiseiwitsch@scmp.com

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If the fourth quarter of 2013 is anything to go by, the year ahead will be busy for initial public offerings, with a diverse set of issuers and lots of new cash coming into the market.

The fourth quarter created momentum for Hong Kong IPOs, with December generating as much volume as the first six months of 2013 combined, according to Thomson Reuters.

Deal flow looks strong for the year ahead. If only four of the mooted floats of 2014 hit Hong Kong - namely Hongkong Electric, AS Watson, Shuanghui, and Alibaba (still a possibility) - the city will double the IPO fundraising seen in 2013.

More promising for Hong Kong IPOs, a real market returned for listings in the second half. Offshore institutional capital and local retail money entered a diversity of deals.

The market was wide open in the fourth quarter … with HK retail back and active

RUPERT MITCHELL, CITI

State-owned firms (Cinda, Qinhuangdao Port) came to market alongside privately owned enterprises (Kerry Logistics and Fu Shou Yuan), and these deals were sold to an array of investors.

"The market was wide open in the fourth quarter … with Hong Kong retail back and active. This bodes well for 2014," said Rupert Mitchell, the head of the Asia equity capital markets syndicate at Citi.

It was a remarkable finish, if only because the Hong Kong market in the months up to September was so dysfunctional. The deal flow up to May largely comprised state-owned enterprises that were sold heavily to mainland corporate investors. In other words, the sale of one SOE to another, that for some reason went through the city's exchange.

"It was a combination of cornerstones being needed to get the deals done, and a lack of international institutional interest on the one hand; and the issuers or their shareholders roping-in SOEs for that purpose on the other," said Philippe Espinasse, author of IPO: A Global Guide, of the deal flow early in the year.

The sale of 61 per cent of Hydoo International's Hong Kong IPO to cornerstone investors was emblematic of that trend, even if the deal priced in October.

Damien Brosnan, the head of UBS' Asian equity capital markets syndicate, said global investors that had made big gains with Japanese and American equities this year started to redeploy cash to emerging markets, such as China offerings.

After a tough couple of years, the Hong Kong IPO market looks healthy. Supply and demand are back, and largely in balance.

This article appeared in the South China Morning Post print edition as IPO surge sets up bright 2014 for HK

 

JPMorgan bows out of IPO amid Asia hiring probe

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/e0283bee-826a-11e3-8119-00144feab7de.html#ixzz2rayP7zJu

By Paul J Davies in Hong Kong

JPMorgan has bowed out of a potentially lucrative role in the $1bn Hong Kong listing of a Chinese chemicals company due to the investigation into the US bank’s hiring of princelings.

The bank was one of several institutions working with Tianhe Chemicals towards a listing but decided to end its involvement when an internal risk review noted that the daughter of the company’s chairman had worked at JPMorgan, according to people familiar with the situation.

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The US Securities and Exchange Commission and the Department of Justice last year launched a probe of JPMorgan’s hiring practices over whether it had hired princelings – the family members of influential figures in the Chinese government and elite – to win business.

Hiring candidates in order to land specific business mandates would violate the US Foreign Corrupt Practices Act.

It is the second time in as many months that JPMorgan has walked away from an initial public offering due to the US authorities’ princeling probe, after it backed out of the Hong Kong listing of Everbright Bank late last year.

Tang Xiaoning, son of a former banking regulator who is now head of the bank’s parent company, state-owned China Everbright Group, is one of the princelings at the centre of the US probe.

Joyce Wei, who is the daughter of Tianhe Chemicals chairman Wei Qi, worked at JPMorgan between January 2012 and August 2013, according to the Hong Kong regulator’s register of authorised finance professionals.

JPMorgan has been working with Tianhe on and off since at least 2011, according to IFR, the trade magazine, which first reported JPMorgan’s IPO withdrawal.

As long as the US investigation continues, JPMorgan will probably have to walk away from any other business where there is a link between its staff and the company because of the reputational risk, people familiar with the matter said.

Ms Wei, whose first name is Jiao in Chinese, now works in equity capital markets at UBS in Hong Kong. UBS also is working on the potential Tianhe IPO but was handed its role before Ms Wei joined in October last year, according to a person familiar with the situation.

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JPMorgan and UBS both declined to comment.

Ms Wei is not strictly a princeling as Tianhe is a private company, part-owned by Morgan Stanley’s private equity arm, and not government-controlled.

The hiring of well-connected youngsters is common in Asia and especially China, although banks argue this is because their privileged backgrounds and private education make them among the best candidates in the region.

In Hong Kong, for example, two daughters of Canning Fok, the chief executive of Li Ka-shing’s Hutchison conglomerate, have both worked at Goldman Sachs and one is now married to Matthew Koder, the head of investment banking at Bank of America Merrill Lynch in the region.

Those two banks led the recent attempted $3bn-$4bn sale of Hutchison’s ParknShop business. There has been no suggestion of any impropriety in those mandates.

Since launching their probe of JPMorgan, US authorities have sent letters to all other US banks and European banks with operations in both Asia and the US requesting information about their hiring practices.

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• United States of America,
• China,
• IPOs,
• UBS AG

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Munir Majid named CIMB Asean Research Institute chairman

KUALA LUMPUR: Tan Sri Dr Munir Majid has been appointed CIMB Asean Research Institute (CARI) chairman effective Feb 1. The appointment is for two years.

Munir, who is also Bank Muamalat Malaysia Bhd chairman, will take over from Bapak Glenn Muhammad Surya Yusuf, who will remain on the board of CARI. He said the next two years would be challenging as Asean sought to become a community based on three pillars – economic, political and socio-cultural.

“However, although business people are most interested in the AEC (Asean Economic Community), there is insufficient consciousness of the challenges – and opportunities,” he said in a statement.

CIMB Group chief executive Datuk Seri Nazir Razak added: “With (Munir’s) experience, intellect and network, he will reinvigorate CARI and Asean Business Club (ABC) at a crucial time, with AEC fast approaching.”

CARI was established in 2011 by CIMB as a not-for-profit research unit in support of Asean economic integration, and the AEC in particular. It is also the secretariat of the ABC, a network of leading Asean multinational CEOs.

 

New twist in Malaysia's investment banking

INVESTMENT banking in Malaysia has taken a new twist with the smaller banking groups tying up with local and worldwide presences.

Feeling the heat of limited organic growth, Affin Holdings Bhd is buying the core operations of Hwang DBS (M) Bhd for RM1.36bil.

RHB Investment Bank Bhd (RHBIB) is spreading its wings into the European market via a partnership with a leading European investment bank, Espirito Santo Investment Bank (ESIB).

Under the partnership, ESIB will undertake to distribute RHBIB’s Asean equity research and investment banking products in Europe and North America which are markets in recovery.

“The partnership will give us access to the European and North American markets and vice versa,’’ RHB Capital group managing director Kellee Kam told StarBiz.

“The aim here is to connect opportunities between the regions, leveraging on the strengths of both of the companies,’’ Kam said.

So far, it’s been the larger investment banking goups making waves overseas with CIMB’s purchase of Singapore based GK Goh and Royal Bank of Scotland’s (RBS) Asian arm, and Maybank’s purchase of Singapore based Kim Eng Securities.

“It will be a challenge to make it work,’’ Affin Holdings CEO Datuk Zulkiflee Abbas Abdul Hamid told StarBiz.

“But it was an opportunity to make investment banking relevant,’’ he said. “This is the best opportunity as there are probably no more investment banking goups to acquire.’’

The Hwang DBS acquisition catapults Affin’s stockbroking business into second position and asset management, fifth.

“Hwang DBS’ branding and people gives us the synergy to move on,’’ he said. “Buying three of their operations not only enables us to cover the local landscape but also gives us the scale to look regionally.’’

Earlier, Affin Holdings signed a business alliance with Japan’s Daiwa Securities Group Inc to mutually distribute research products and channel client trades.

“We are not giving up on Indonesia,’’ Zulkiflee said, adding that Affin Holdings was still pursuing the purchase of a bank in Indonesia.

In their efforts to spread their wings, these banking groups must place risk management as a top priority.

With enlarged aspirations come enlarged risks and costs.

As it is, CIMB is feeling the pressure in dealing with costs related to its RBS acquisition.

“CIMB is having a tougher time with investment banking than the Malaysian bank’s management expected when they bought most of RBS’ Asian arm, but Datuk Seri Nazir Razak, chief executive, insists it will break even next year,’’ said the Financial Times.

Nazir told the Financial Times he had underestimated the difficulties of combining the businesses and ironing out costs, as well as the time it would take to replace some of the licences that RBS wanted to keep after the spring 2012 agreement.

Asian banks emerged tops in project financing last year.

Japanese and other Asian banks cemented their positions as the lead arrangers for project-financing deals last year while several big European banks continued to retreat from the business as they shrink their balance sheets, said Reuters.

There were US$204bil of project finance deals globally last year, up 0.8% from 2012, and the top six arrangers were from Japan, India, China and Korea, according to Thomson Reuters data.

This trend may not be sustainable as it may be only a matter of time before European banks catch up after cleaning up their balance sheets and rebalancing their priorities.

Asian banks should use this window of opportunity to stamp their mark and build branding.

At the Singapore Exchange Ltd (SGX), the penny stock scandal that hammered trading volume, has resulted in the SGX reporting its weakest quarterly profit in more than a year, said Reuters.

However, revenue from its derivatives business outstripping securities for the first time.

Revenue from share trading and other listed-securities was 13% lower than a year ago, while derivatives jumped 16%, underlining the bourse’s increasingly diverse business mix, said Reuters.

Developing the derivatives market at the SGX has paid off and helped to offset problems in the equity side.

Although fraught with competition and challenges, the derivatives sector apppears to yield sustainable results fo SGX.

However, strict monitoring and risk management are essentials for the continued success of its derivatives business that should be more as a hedging than speculative tool.

Columnist Yap Leng Kuen awaits further progress in SGX’s struggle to rise above the ashes.

 

 

Asia Pacific ECM shrink again in 2013, rebound seen next year

HONG KONG: Equity capital markets in the Asia-Pacific ex-Japan region shrank for a third consecutive year in 2013, hurt by a downturn in India and slower activity in mainland China.

The overall decline contrasts with a rebound in IPO issuance that is stoking optimism for a boom in 2014 as China resumes new listings after a one-year hiatus and markets from Hong Kong to Malaysia get multi-billion dollar deals.

The pickup in initial public offering activity is key for investment banks in the region as new listings carry much higher fees than follow-ons, block deals or convertible bonds. After a round of layoffs and bonus cuts, when some banks even exited the region, the IPO revival would give a much-needed boost to bank revenue.

UBS, which has come out on top of Asia-Pacific equity capital market league tables for eight of the past nine years, raked in US$220.9mil in estimated fees, buoyed by its strong presence in South-East Asia.

"This year's ECM activity was healthier in part because of product breadth and specifically because market appetite for IPOs came back for longer and in a more consistent fashion than it has in years," said Damien Brosnan, head of Asia ex-Japan equity syndicate at UBS.

The Swiss bank worked on US$18.4bil’s worth of deals, ahead of Goldman Sachs, which managed US$16.2bil, and Credit Suisse with US$7.4bil.

Goldman Sachs ranked second in ECM fees, earning US$173.8mil, followed by JPMorgan with US$150.3mil, according to Thomson Reuters/Freeman Consulting Co estimates.

Equity issuance in the region fell 5% to US$163.9bil, according to preliminary Thomson Reuters data through Dec 17.

Proceeds from initial public offerings however, rose 2.3% to US$40.6bil as a surge in new listings in Australia, New Zealand and Hong Kong helped offset weaker markets in Malaysia and South Korea and the absence of deals in mainland China.

Bankers and analysts expect a bumper year in 2014, with large offerings in Hong Kong putting the city at centre stage for IPOs again.

Some of the top deals expected include a US$5.7bil IPO for the electricity business of Li Ka-shing's Power Assets Holdings Ltd, a US$6bil deal from Chinese meat processor Shuanghui International Holdings, and listings from health and beauty products retailer A.S. Watson & Co Ltd and e-commerce giant Alibaba Group Holding Ltd.

The resumption of IPOs in Shanghai and Shenzhen next month should provide a much-needed boost to deal volumes in the region, after zero activity for more than one year in China. The first batch of about 50 companies to list in China in January alone should bring in 44 billion yuan (US$7.3bil) in proceeds.

Advisory firm EY forecasts some US$23.2bil’s worth of IPOs in Hong Kong next year, with some 200 billion yuan (US$32.9bil) of new listings in China, the two main markets in the Asia-Pacific region.

"People have been scared about the QE3 retreat, interest rates, the fiscal cliff, and for next year you can see there are not that many topics that will make people so scared," said Ringo Choi, Asia Pacific IPO leader at EY in Hong Kong, in reference to the quantitative easing (QE) programme in the US.

"In the first quarter when they reopen, there will be a boom," EY's Choi said about China's market, adding that businesses related to domestic consumption would stand out – Reuters.