Asia dealmakers see more IPOs, convertible bonds in 2025

INVESTMENT bankers are pinning hopes on initial public offerings (IPOs) in Asia to grab a bigger slice of equity capital markets volumes in 2025, after such transactions fell to the smallest proportion in eight years as Chinese deals remained muted.

New listings in mainland China have underwhelmed since last August, when the securities regulator tightened local issuance to stabilise its stock market. Similarly, Hong Kong’s IPO market has struggled due to China’s economic woes and Beijing’s regulatory crackdowns on various sectors.

IPOs on both mainland exchanges and in Hong Kong raised just about US$27 billion this year to Thursday (Dec 19), on track for the lowest annual volume since 2013, according to data compiled by Bloomberg. Across the whole of Asia Pacific, first-time share sales accounted for just 30 per cent of all ECM volumes, well below the 43 per cent average for the years 2017 to 2023, the data show.

“China volume will continue to grow in 2025,” said James Wang, co-head of equity capital markets for Asia excluding Japan at Goldman Sachs. “Investors have come to recognise China risk, but also see valuations being pretty attractive in selective assets.”

Meanwhile, follow-on stock offerings and convertible bonds have helped fill the void left by Chinese IPOs. Dollar-denominated convertible and exchangeable bonds by companies in the region have raised a record US$29 billion this year, up 40 per cent from the tally in 2023, as companies sought cheap money against the backdrop of high interest rates.

This year saw mammoth deals including those raising US$5 billion by Chinese e-commerce company Alibaba Group Holding and US$3.5 billion by Ping An Insurance.

Convertible-bond issuance is likely to continue in 2025 despite expectations for borrowing costs to fall, Goldman Sachs’ Wang said. “Companies will continue to need to raise capital, and while the market is improving, it will remain volatile.”

A drop in equity issuance by Chinese firms, which historically made up the bulk of the region’s transactions, has resulted in a larger proportion of deals originating from other countries. IPOs in India have raised a record US$19.4 billion this year, with bankers expecting even more proceeds from such listings and follow-on share sales to institutions next year.

In Japan, IPOs have raised US$6.3 billion this year, more than each of the previous two years’ annual volumes, thanks to big listings such as Tokyo Metro’s US$2 billion-plus share sale. Metal refiner JX Advanced Metals is among firms slated to go public next year, with a share sale that may raise up to about 700 billion yen (S$6.1 billion), Bloomberg News reported.

The magnitude of Chinese equity deals next year hinges on the China Securities Regulatory Commission’s willingness to approve domestic listings. Offshore, the pipeline of Chinese IPOs depends on mainland companies seeking second listings in Hong Kong, a process seen as more straightforward due to these companies’ track records on domestic exchanges.

“A to H is a proven theme,” said Peihao Huang, co-head of Asia-Pacific equity capital markets at JPMorgan, referring to firms seeking a second listing in Hong Kong. Global long-only investors and sovereign-wealth funds have returned to deals this year compared to the last one to two years, she added.

Other Chinese companies in the pipeline for offshore listings include those in artificial intelligence, semiconductors and clean energy – areas that align with the nation’s strategic goals to enhance its technological capabilities, said Christine Xu, a partner at law firm Linklaters, who leads Chinese ECM transactions. BLOOMBERG