Asia Pacific’s 2023 equity capital market league table tells the story of Japan’s revival, in short.

Out of the 10 largest ECM banks in APAC last year (excluding China), four were Japanese, led by Nomura which overtook the region’s 2022 ECM champion UBS, based on Dealogic data. In 2022, only Nomura and Sumitomo Mitsui made it to the top 10 rank.

Nomura arranged USD 9.9bn worth of deals in terms of apportioned value last year, followed by Morgan Stanley’s USD 8.79bn, and JPMorgan’s USD 8.73bn. UBS managed USD 10.18bn worth of ECM deals in 2022, followed by Morgan Stanley’s USD 6.52bn and JPMorgan’s USD 6.45bn.

A deeper examination into the underlying deals reveals that banks that were active in Japan managed to rank higher on the chart last year. As reported earlier, Japan alone accounted for six of the region’s top 10 ECM deals in 2023.

Nomura was involved in four of the six Japanese deals making it to the top 10 – Japan Post Bank ‘s [TYO:7182] USD 8.99bn block, Denso Corp‘s [TYO:6902] USD 3.66bn block, Socionext’s  [TYO:6526] USD 1.32bn block and Asahi Group Holdings’ [TYO:2502]  USD 1.2bn follow-on.

Morgan Stanley, for instance, arranged USD 4.87bn worth of Japanese deals by apportioned value in 2023, more than half of its full-year total.

JPMorgan was more diversified geographically. India, another hot market last year in Asia, contributed USD 2.33bn worth of ECM deals for the bank, followed by Japan, which counted on JPMorgan to raise USD 2.15bn in apportioned value from ECM paper, Dealogic data show.

South Korea, Japan usher in first follow-on, convertibles 

Around halfway through January 2024, market consensus remains that Japan, South Korea, India and perhaps Indonesia will likely continue to lead the pack this year, though there’s a chance of Hong Kong IPOs coming back.

A hedge fund manager in Hong Kong said across Asia, South Korea and Japan are the only markets that have fared decently so far in 2024.

An up to USD 1.65bn clean-up sale of Samsung Electronics [KRX:005930] shares by KEB Hana Bank on Wednesday, 10 January, was Asia’s first big-ticket ECM deal in 2024.

The following day, Daiwa House Industry [TYO:1925], Japan’s property developer giant, launched a JPY 200bn (USD 1.38bn) dual-tranche convertible bond (CB) offer, the first market-sized equity-linked bond of the year.

While the regional MSCI Asia Pacific has lost 2.6% so far in 2024, Japan’s Nikkei 225 continued to march higher, gaining 4.7% to fresh highs. India’s Nifty 50 Index edges 0.4% lower year to date, but the index still hovers around record levels.

In Hong Kong, the Hang Seng Index has retreated 4.4% this year thus far.

After years of declining relevance, there’s a chance the city may finally reclaim some of its lost luster in the IPO space.

Hong Kong IPO filings – so far 2024

Data: Dealogic ECM (ionanalytics.com) 

Investors are rather excited about the H-share secondary listings of such Chinese companies as Contemporary Amperex Technology (CATL), an electric vehicle battery maker, and Midea Group [SHE:000333], a Guangdong-based electrical appliances maker, which filed in October last year for a Hong Kong mainboard listing.

But as 2022 and 2023 suggested, unrealistic valuation expectations by issuers remain a key hurdle for the region’s IPO market to reopen.

Investors would be tempted to take cues from newly-listed stocks and focus more on the financials of issuers rather than operation guidance too far out, in a year when every market player is trying to read as closely as possible into the lines from the US Federal Reserve about when the rate cycle may reverse.