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MARKETREVIEW&OUTLOOK
Ayearofpolaropposites
Thedespondencyoftheearlypartof2009rapidlygavewaytovastamountsofequityanddebtissuance.
Withpipelinesstillfittoburst,thecomingyearbodeswellforfurtherdealflow.RichardMorrowreports.
I
If the past 12 months revealed anything, it’s that capital markets can make were accurate, but they occurred to a far greater degree than we could
fools of us all. have envisaged.
Everything was doom and gloom at the start of the year as everyone As things stand now, the easy money has been made. But that is not
feared a global recession and miniscule levels of deal flow. Yet while west- necessarily a bad thing for the consistency of the markets. Asia’s
ern economies have continued to struggle to manage their vast debt expo- economies look back on a decent track, and equity valuations look to
sures, Asia rallied from a brief flirtation with recession and performed have a small amount more upside (see Research Report on page 74).
admirably. Bond spreads, meanwhile, have catapulted inwards, and that could lead
In retrospect 2009 may come to be viewed as the year in which the bal- to some small levels of correction.
ance of financial power globally noticeably began to shift from West to But it is not likely that there will be any sort of meltdown of the likes
East. we saw in late 2008. Bank confidence is back, and Asian companies in
That is not to say we can expect the region’s capital markets to start particular are gaining a global following as they enjoy the sort of growth
leading the world. The US remains by far the largest and most vibrant hub that leaves many western counterparts green-eyed with envy.
for equity and debt. But nations such as China and increasingly India have
begun to feel more comfortable in wielding the financial resources they EQUITY’SROCKYCOURSE
possess to buy assets and woo investors. At the beginning of the year nobody could muster much confidence.
Yet back in January regional investors and issuers were in just as much Instead, the prevailing sentiment was to avoid capital markets altogeth-
of a panic as their international counterparts. er, or plunge in as fast as possible to get emergency funding money.
Fear that the world’s financial markets were in meltdown threatened to This applied to western companies, especially ailing financial institu-
paralyse lending and capital expenditure. The Hang Seng index tumbled tions, that desperately needed capital. It led to the greatest activity in the
downwards during the early months of the year to hit a low of 11,344.58 first quarter: equity sell-downs in Chinese banks and rights offerings to
on March 9. A global financial depression looked like a real possibility. shore up capital.
It is to the credit of western monetary policy and Asian fiscal policy that UBS began the rapid spate of deal flow with its self-guided sale of a
this did not transpire. China’s financial intervention in its own market was stake in Bank of China (BoC) for HK$6.5 billion (US$841 million) on
unprecedented. While questions may arise in the years to come over the December 31, the very earliest date in which it could sell the shares. The
wisdom in the vast sums of lending it had its state banks conduct, there is offer had been fairly well anticipated in the market, but it was still very
little doubt that it invigorated an economy in danger of spluttering. And unusual timing. To ensure investors were keen to get involved the Swiss
the rest of Asia benefited from that. bank prices the shares at a 12% discount to BoC’s previous trading price.
In truth, Asia only slipped into the trough of financial fears for around Bank of America followed eight days later with its own HK$22 billion
six months. During the first quarter of the year was the lowest point, when sale of shares in China Construction Bank, also for a 12% discount.
it was impossible for new equity issuers to consider deals, and even tried Allianz and American Express were to bring their own sale of shares
and tested companies had trouble raising funding. from Industrial & Commercial Bank of China in April, with Goldman
Confidence roared back through the region as companies benefited Sachs following with its own sell-down in the same bank at the begin-
from Chinese demand, while realising that by and large their financial ning of June.
positions were much stronger than most of their western counterparts. The other notable fund-raising during the early months of the year
This revitalisation in confidence allowed for unprecedented levels of equi- was Development Bank of Singapore’s S$4.1 billion (US$2.75 billion)
ty and G3 debt issuance. The secondary markets rocketed, too. The Hang rights offering. Conducted on January 23, the sale was a good result for
Seng index had returned to 21,893.92 by December 15. the bank, but the five participating bookrunners was a sign of the times.
Looking back at our predictions 12 months ago, we were correct to Usually banks are reluctant to carry the six weeks-worth of equity
forecast that the markets would begin to see increased issuance again in risk on their books that rights offerings entail, but in virtually lifeless
the second half of this year, and that bond spreads would narrow. Both markets they had few other options.
ASIA(EX-JAPAN)ECMBOOKRUNNERRANKINGS
2009YTD 2008YTD
Rank Bookrunner Dealvalue No. %share Rank Bookrunner Dealvalue No. %share
US$(m) US$(m)
1 UBS 13,425 58 8.8 1 CITICSecurities 6,843 10 8.3
2 MorganStanley 13,178 61 8.7 2 Citi 5,217 22 6.3
3 CICC 11,745 11 7.7 3 UBS 4,349 23 5.2
4 J.P.Morgan 10,833 50 7.1 4 CreditSuisse 3,750 19 4.5
5 GoldmanSachs 10,794 35 7.1 5 CICC 3,433 4 4.1
6 CreditSuisse 8,813 55 5.8 6 MorganStanley 3,430 21 4.1
7 Citi 7,399 58 4.9 7 PTDanatamaMakmur 3,130 4 3.8
8 CITICSecurities 5,971 15 3.9 8 DeutscheBank 3,088 18 3.7
9 BankofAmericaMerrillLynch 5,951 28 3.9 9 J.P.Morgan 3,072 17 3.7
10 DeutscheBank 4,895 33 3.2 10 GoldmanSachs 3,002 14 3.6
Total 152,196 1,289 100 Total 82,929 826 100
SOURCE: DEALOGIC
22 DEC2009/JAN2010 ASIAMONEY
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