China’s crackdown on technology companies is prompting global investors to look for new opportunities across Asia, contributing to a record increase in initial public offerings (IPO) from India to South Korea that shows few signs of slowing.
Tech companies from those countries and Southeast Asia have raised US$8 billion from first-time share sales this year, already blowing past the previous annual peak.
The tally is poised to grow bigger with planned listings by companies including Indian fintech giant Paytm and Indonesian Internet conglomerate GoTo, both of which might break local fundraising records.
Long overshadowed by their Chinese peers, this new crop of start-ups is coming of age just as Beijing’s clampdown puts a damper on listing and growth prospects in what had long been the region’s hottest IPO market.
The result, some bankers say, might be the start of a new era for tech listings in Asia. Investors are already boosting exposure to markets outside China, with some buying into IPOs from countries such as India and Indonesia for the first time.
Prospective issuers that historically benchmarked themselves against Chinese companies are highlighting similarities to other global peers in hopes of attaining higher valuations.
“These are strong companies and stories in their own right, but the overwhelming demand has been enhanced by rotation away from China tech,” said Udhay Furtado, cohead of Asia equity capital markets at Citigroup Inc.
China’s regulatory onslaught, now in its 10th month since the shock implosion of Ant Group Co’s (螞蟻集團) IPO, has slashed valuations for the nation’s listed tech companies by nearly 40 percent.
It has also forced many start-ups to pause their IPO plans after regulators announced a stricter vetting process for overseas offerings.
China and Hong Kong accounted for about 60 percent of Asian tech IPOs since the end of June, down from 83 percent in the second quarter, according to data compiled by Bloomberg.
About three-quarters of Chinese companies that listed overseas this year are trading below their IPO prices.
Meanwhile, deals in smaller markets are attracting outsized demand as investors bet on increasingly Internet-savvy populations, growing consumer spending and a new class of tech entrepreneurs.
PT Bukalapak.com, an Indonesian e-commerce firm, raised US$1.5 billion near the end of last month in the country’s largest IPO, far outstripping an early goal of US$300 million to US$500 million.
Zomato Ltd, an Indian online food-delivery and restaurant platform, received bids worth 1.5 trillion rupees (US$20.41 billion) from large funds for its anchor tranche, making it one of the most popular Indian offerings among institutional investors. The company raised US$1.3 billion last month.
KakaoBank Corp, South Korea’s first Internet-only lender to go public, sold US$2.2 billion of new shares last month and soared more than 70 percent in its trading debut.
The hurdle for allocating capital to tech companies in China “is now much higher than it was even a month ago,” said Vikas Pershad, a portfolio manager at M&G Investments (Singapore) Pte. “The net exposure to China tech is lower and the net exposure to technology-driven business models outside of China is higher.”
One banker who asked not to be named discussing client information said that some Hong Kong-based investors who previously focused on Chinese deals are participating in tech IPOs elsewhere in the region.
US hedge funds are also looking at India more closely, another banker said.
Morgan Stanley research analysts recently advised clients to rebalance their Internet holdings away from China and into India and Southeast Asia.
“Are investors more interested? Definitely,” said William Smiley, cohead of Asia ex-Japan equity capital markets at Goldman Sachs Group Inc. “Global capital competes among itself and investment opportunities are judged on both an absolute and relative basis.”
Whether the enthusiasm will last is an open question. Bukalapak.com briefly dipped below its offering price this month, although the stock has since rebounded. Zomato and KakaoBank are trading 64 percent and 115 percent above their IPO prices respectively.
A growing pipeline of deals would put investor demand to the test. Paytm — formally called One97 Communications Ltd — has filed for a 166 billion rupee IPO that is set to be India’s largest.
Policybazaar, an online insurance marketplace, is looking to raise as much as 60.18 billion rupees.
GoTo, formed by the merger of Indonesian ride-hailing giant Gojek and e-commerce provider PT Tokopedia, is planning a domestic IPO this year before seeking a US listing. It is raising funds at a valuation of US$25 billion to US$30 billion, meaning it could become Indonesia’s biggest debut.
“There are increasingly diverse sources of capital investing in leading Asia-based growth businesses,” said Gregor Feige, cohead of ECM Asia ex-Japan at JPMorgan Chase & Co. “Sovereign wealth funds are more active across the board. They’re leaning in and the global long-only community is also increasingly comfortable with local listings across Asia.”
The flood of tech IPOs in Southeast Asia and India is poised to reshape markets where benchmark indexes have historically focused on “old-economy” sectors such as energy and finance.
Favorable demographics and domestic consumption growth in Southeast Asia “have not translated fully into stock market performance of late, as some of the fastest growing businesses were not listed,” said Pauline Ng (黃寶麗), a portfolio manager at JPMorgan Asset Management.
The growing representation of “new-economy” companies means these markets “can no longer be ignored,” she said.
The US dollar on Friday rose against the euro, but pared gains late in a session that was muddied by quarter-end trading, while riskier commodity-led currencies fell sharply after European inflation hit a record high and US consumer spending increased faster than expected. Although the dollar index was showing its biggest quarterly gain since the first quarter 2015, but was registered its first weekly decline in three weeks. Sterling rose against the dollar after falling earlier in the day. The pound last showed four straight sessions of gains followed by wild declines on concerns about Britain’s plan to slash taxes and pay
SAMSUNG DISTANT SECOND: Top local chip fims served nearly two-thirds of the global market in Q2, while Samsung kept South Korea competitive with its 16.5 percent share Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) remained the world’s largest contract chipmaker in the second quarter of the year with a 53.4 percent share of the global pure-play foundry market, the Taipei-based market information advisory firm TrendForce Corp (集邦科技) said in a research report on Tuesday. Despite TSMC’s market share dipping slightly from 53.6 percent in the first quarter, it was still far ahead of its rivals, TrendForce said. TSMC continued to benefit from emerging technologies, such as high-performance computing devices, the Internet of Things and automotive electronics, as it posted US$18.15 billion in sales in the second quarter, up 3.5 percent
Moderna Inc has refused to hand over to China the core intellectual property behind the development of its COVID-19 vaccine, leading to a collapse in negotiations on its sale in the country, the Financial Times reported on Saturday, citing people familiar with the matter. The Cambridge, Massachusetts-based pharmaceutical company turned down China’s request to disclose the formula for its mRNA vaccine because of commercial and safety concerns, the newspaper said, citing people involved in negotiations that took place from 2020 to last year, adding that the vaccine maker is still “eager” to sell the product to China. The company had “given up”
Wafer Works Corp (合晶科技) yesterday announced a NT$15 billion (US$470.7 million) wafer plant investment at the Central Taiwan Science Park (中部科學園區) to cope with rising demand for auto chips. Construction of the 12-inch fab should begin soon, the Taoyuan-based silicon wafer manufacturer said, adding that it would become operational in 18 months to two years, it said. The fab, to be built on the science park’s campus in Changhua County’s Erlin Township (二林), is planned to have an installed capacity of 200,000 wafers a month, the company said. Wafer Works is operating a 12-inch wafer test line, with monthly output expected to reach