A triumph of hope over experience

The experience of the first half of the year has not dampened the desire for fresh funding, nor fresh investments.

One of the most useful pieces of research that crosses my desk is the Weekly Review produced by the equity capital markets team at Salomon Smith Barney. Every week it up dates what has happened in the Asian equity market in terms of new issue activity, secondary trading activity and notable events.

There are also two sections which I find particularly useful. These are grouped together under the title of Regional New Issue Activity. The first section is sub titled Performance of 2000 Priced Issues and the second is subtitles New Issue Activity. Looked at together, they offer a fine exemplar of the triumph of hope over experience.

The average performance of the 76 Asian equity deals that have priced this year has been -21.7%. This number includes such famous deals as Tom.com which is still up over 200% and such infamous deals as Sunday (-76%), Asiacontent.com (-79%), Satyam Infoway (-82.2%) and New World Cyberbase (-83.6%). Of those 76 deals, 52 are trading below issue price while 24 are trading above it.

Yet what is striking is that despite the evidence that shows the vast majority of Asian equity deals which have priced this year are trading below the issue price, the new issue pipeline is full to  bursting.

The team at Salomon have found no fewer than 132 Asian companies that are planning to do Asian equity deals between now and this time next year. Obviously most of these companies are in the technology, media, telecom (TMT) sectors and will probably have a hard time raising the money they so desire. And just because they say they are looking to list, there is no guarantee that they will succeed. 

There are also some block busters on the horizon - the $1billion MTRC offering in Hong Kong, the $3 billion convertible for EFIL, the $2.5 billion IPO from Sinopec and the $3 billion secondary placement for China Mobile - to name just four.

If only a third of these deals - big or small - manage to get done it will be a considerable achievement. But given the mauling that investors have suffered at the hands of Asian equity issues so far this year, their greed will have to be stronger than their fear. It will be interesting to see what the Salomon research report says in six months time.

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