Singapore equity issuance expected to gather steam

After two slow months, bankers say deals planned for the fourth quarter and 2008 remain on track.
The unravelling of the US subprime loan crisis has led to a virtual halt in new equity issuance in Singapore over the past six weeks, as it has in most other Asian markets. But bankers say the primary equity market is starting to gather momentum again and deals planned for the fourth quarter are still on track.

One much talked about initial public offering is the Lippo-Mapletree Real Estate Investment Trust that was originally scheduled to be launched last month. The deal was expected to raise about $400 million, with BNP Paribas, OCBC and UBS as the joint lead managers. But the IPO failed to materialise as the Singapore stockmarket fell 14.6% during the first three weeks of August.

One banker brushes off the delay as "not significant", noting that August is traditionally a slow month for equity deals anyway. Another says the delay could be unrelated to the current market sentiment, and perhaps due to the company exploring possible alternative financing options.

However, some bankers argue that the current volatility means that a number of deals are being left on hold. And even though the Singapore benchmark index has recovered about 65% of its August losses, uncertainty, instability and volatility are expected to dominate the equity market for the next couple of months.

ôEveryone is expecting volatility and most people are expecting another leg down in the US markets,ö says one banker. He adds that in the near term, investors will certainly be watching out for the third-quarter results from key US investment banks as well as the interest rate decision by the FOMC (Federal Open Market Committee) that was due to be published overnight.

The latter is expected to reduce some of the uncertainty in the market, although should the Fed decide not to accommodate the widespread expectations of a rate cut, the meeting could end up having the opposite effect and actually add to the current jitters.

A first sign that primary market activity is beginning to pick up in Singapore was the launch last week of a small IPO for Sinostar PEC Holdings. The China-based producer of downstream petrochemical products is looking to raise S$61 million ($41 million) through a Singapore listing arranged by joint lead managers SBI E2-Capital and CIMB.

And delays aside, none of the bankers that FinanceAsia spoke to last week were aware of any deals being pulled due to current market conditions. On the contrary, they say deals planned for the fourth quarter this year and early 2008 are still on track.

ôIÆve had no delay or let up in that part of the pipeline,ö say one banker. Echoing this, a colleague at a rival firm reports "a large number of deals" in his pipeline.

Many of the deals expected to come to market soon are real-estate related. Among the most imminent is real estate fund managers ARA Asset Management, which is planning to raise $200 million through a Singapore listing. Lead managers Credit Suisse and DBS have started to pre-market this offering to institutional investors.

Another property-linked deal is a real estate investment trust called Asia Pacific Land Group which plans to raise S$500 million ($333 million). This will be the first Reit backed by Japanese assets to list in Singapore. JPMorgan and Lehman Brothers are leading the deal.

Hong Kong-based China New Town Development, a unit of Shanghai Real Estate, is also eyeing a $250 million Singapore IPO in October with Citi as the lead manager.

Besides the real estate deals, GE Commercial Aviation Services is planning to list its Altitude Aircraft Leasing Trust in Singapore in the fourth quarter. This deal is expected to raise about $400 million and is being arranged by Goldman Sachs and DBS.

Bankers also anticipate a pickup in cross-border issuance of instruments such as global depository receipts).

ôThere are also a few offshore and marine type companies looking at the market,ö adds one banker.

It is worth noting that the current slowdown of equity issuance in Singapore is not due to a lack of investor capital. Asian equity funds are still very healthy and finding enough capital to back the deals is not an issue, the dealmakers say. ôSome of the fund managers are actually getting net inflows,ö notes one banker.

However, the volatile market conditions have had an impact on the pricing of deals.

ôMost of the trades were (previously) done towards the top end but now the price is pushed back towards the lower end and the mid-point of the (indicative) range,ö notes one banker. Another predicts that ôtop of the range pricing will be less common than what it was six months agoö.

Another source argues that in the current market, the price of the deals is not the real issue. ôAt the moment, investors are very nervous about the market and they don't like primary deals when thereÆs instability. Thus you can price something attractively in these markets and it still wouldnÆt work,ö he says. ôIt's not about the price, but the volatility. Once that volatility dies down and stability returns, investor confidence will return and deals will get done.ö
¬ Haymarket Media Limited. All rights reserved.
Share our publication on social media
Share our publication on social media