Investment funds have expanded into Asia to take advantage of growing economies and less restrictive market conditions, making it possible for Asian companies to go public faster than their Western counterparts. The West has yet to recover from the Great Recession, leaving room for the East to accelerate through its inevitable development phase and expand further into global markets. As a result, Asian trade volumes have increased by 22% over the past year, creating new opportunities for international investors. The Saxo capital markets provide more information on this.
IPOs are big in Asia
Asian countries are no strangers to initial public offerings (IPO). In 2014 alone, 163 IPOs were completed in Korea, valued at HKD4.7 billion. China also saw 16 multimillion-dollar IPOs that totalled HKD1.8 billion. However, only 15 IPOs occurred in Europe and America combined in the same year, even though their populations are ten times greater than in Asia and the Middle East. This likely indicates significant differences between Western and Eastern IPO investors that may be skewing trade volumes.
The verdict? “Yes, of course!” When the time comes for an Asian company to go public, it can choose from hundreds of international marketplaces. A recent report by ISS Analytics on Chinese companies listed on global exchanges shows that many choose New York over Hong Kong (the most common choice in 2012).
Chinese listings in New York have more than doubled since 2010, while Hong Kong listings decreased by 28% between 2012 and 2014. There may be several reasons why New Yorkers are more receptive; for example, listing fees tend to be lower in their marketplace. While this is good news for international investors hoping to get a piece of the action, risks still abound when investing blindly in new markets. It’s essential to recognize the differences in culture, legislation and execution between each marketplace.
Everyone has an opinion when it comes to Asian companies going public abroad. Whether they are swayed by banking or geography, they all have a right to their perspective. However, there is no denying that Asia is attracting more international investors than ever before. Between banking deregulation in China and the high-speed rail network upending transportation in Japan, Asian countries are driving significant economic growth across the globe. Their economies are growing so fast that they now rival their Western counterparts in size and influence—a tremendous feat for any emerging market.
What are the benefits to an Asian company to IPO?
Attract international investors
The Asian market continues to attract global investment, which has given many Western countries a much-needed boost. The number of IPOs in Europe and America compared to Asia and other Middle Eastern countries are staggering. This gap is likely because investors find it easier and less risky to invest in an already established (and therefore more predictable) market. Most people believe that this trend will continue as Asian markets open up even more, while others fear that these new developments will decrease IPO volume for Western countries.
Attain more investment capital
One of the most direct benefits of an IPO is access to capital. In 2014, HKD79 billion was raised through 694 IPOs in Asia compared to only HKD30 billion across 215 IPOs made by Western countries. Most people agree that this funding gap can be attributed to differences between Eastern and Western investors. The continued growth of the Asian economy has made it too large for conservative investors who are hesitant to invest abroad. It will likely lead to increased capital flow over time, but there is no guarantee that the pace will match the development of these markets.
Attract talented employees
The biggest global employers are all headquartered in America, so competition to attract top talent often leads companies to set up shop there as well. However, American companies are subject to strict immigration regulations when recruiting foreign employees, not to mention costly relocation expenses.
On the other hand, the West is home to some of the world’s most renowned universities and attracts students from all over Asia with attractive benefits packages. So when Asian companies go public on Western exchanges, they immediately gain access to individuals who are highly educated and eager to work for them. This talent jump will likely become an even more significant advantage as education systems in Eastern countries continue to improve their American counterparts.