Record level of ‘Bric’ IPOs offsets fall

Record levels of initial public offerings in emerging economies offset declines elsewhere and helped support the global new issues market in the third quarter, according to a report on the sector by Ernst & Young on Tuesday.

Nearly half of the $57bn raised globally by IPOs in the latest quarter was by companies in the so-called “Bric” countries of Brazil, Russia, India and China, which produced a record 118 IPOs.

Seven out of the top 10 IPOs in the third quarter were from emerging markets. The Asia-Pacific – led by China and Hong Kong – had the lion’s share in terms of both the number of IPOs completed and the total capital raised.

“The record numbers of IPOs in the emerging markets show that it is these countries that are driving global economic growth,” said Gil Forer, global director of IPO Initiatives at E&Y.

Investor sentiment for emerging market assets has been exuberant in recent weeks – in spite of the global credit squeeze and ongoing market uncertainty. In addition to frenetic activity in the primary markets, there has also been sharp rallies in many stock markets, including China, Hong Kong and India.

“The prospect of an economic slowdown has heightened interest in companies that have genuinely superior growth stories,” said John Crompton, head of equity capital markets for Europe, Middle East and Africa at Merrill Lynch.

“Expect to see these trends reflected in the new issue markets. Emerging markets look likely to generate substantial new issue volumes.”

Over the weekend, Petro-China, the state-owned oil and gas group, launched a long-awaited domestic listing in Shanghai, a deal that could raise more than $9bn.

On Monday, Turkey’s Digiturk, a digital television broadcaster, set a price range for an IPO in London, while a number of Russian firms indicated plans to pursue share sales by the end of the year.

Meanwhile, Grupo Clarín, Argentina’s biggest media group, raised more than $500m on the London Stock Exchange on Friday.

In contrast to the rising activity in emerging markets, IPO volumes by developed markets have declined, possibly because of the uncertainty caused by the credit squeeze, the E&Y report said.

Overall global IPO volume fell by 36 per cent to $57bn raised in the third quarter from $89bn raised in the second – though the amount was still more than the $45bn raised in the third quarter last year.