Companies in the Asia-Pacific region have raised less through share sales this year than at any time since 2008 as stock market turmoil brought about by the coronavirus outbreak pushed investors and those seeking funds to the sidelines.
In the first quarter, $20.28 billion was raised across the region including Japan, showed Refinitiv data, as markets experienced their most volatile days in decades.
The turmoil, however, is widely expected to lift the need for already listed companies to sell more shares and raise fresh capital to help recover from the economic downturn, following a drop in business activity as governments worldwide impose restrictions on movement to stop the spread of the virus.
The head of Goldman Sachs' financing group in Asia excluding Japan, Aaron Arth, said the equity-linked new-issuance market had "come to a standstill in the face of extreme volatility".
"In terms of follow-ons, convertible bonds and blocks (trades) we were already anticipating a ramp up in volumes coming through the full-year earnings season," Arth said.
"The coronavirus outbreak has clearly added to capital needs in numerous cases and we expect second-quarter activity levels to reflect this."
In China, where the virus was first reported late last year, contract medical researcher WuXi AppTec Co Ltd said this week it would raise up to $1.7 billion in an A and H share deal to expand research and development facilities and fund overseas growth.
Australia's Cochlear Ltd raised A$930 million ($549.35 million) on Wednesday through an institutional and retail share offer which bankers said could be a sign that more transactions will unfold across the region.
"The revival of the follow-on market may take some time because investors need to assess not only the business outlook in the wake of the virus but also the extent of the stimulus required to buoy those companies and sectors worst affected," said Hannah Malter, UBS head of equity syndication in Hong Kong.
"But volumes are likely to be elevated significantly from current levels in the second quarter and the second half of the year," Malter said.
One question for investment bankers is whether beaten-down investors would be prepared to buy into a rush of regional capital deals.
"On the investor side, we do see them looking seriously at exercising their cash holdings," said JPMorgan's Asia ECM syndication head Niccolo Manno.
IPO PIPELINE REMAINS
Initial public offering (IPO) volume in the first three months of the year was worth $16.2 billion, up from $9 billion in the same period last year due to some mega deals before the coronavirus outbreak took hold.
The largest deals were the $4.4 billion listing of Beijing-Shanghai High Speed Railway Co Ltd in mainland China in early January, followed in February by the $2.5 billion IPO of Central Retail Corp PCL in Thailand's biggest-ever deal.
Goldman Sachs' Arth said while the pipeline of would-be IPO candidates remained active, the timing of any transactions was uncertain given market volatility.
"Issuers are actively engaged to tap any market window available - especially in the second half when the virus situation will hopefully come under control," he said.
"We could well see a pick-up in IPO issuance activity, but we would need some market stability for this to be significant."
(Reporting by Scott Murdoch; Editing by Jennifer Hughes and Christopher Cushing)
By Scott Murdoch