The rise and rise of new IPOs in Asia, and Asian investors


Who would have thought – investing in Asia might soon give investors access to European and US companies.

Some of Europe and America’s most prestigious companies are shunning the well-established financial centres of London and New York and looking to Asia as a place to list and sell their shares, as well as their handbags.

Italian fashion house Prada has applied to list on the Hong Kong stock exchange in the next few weeks. US leather goods maker Coach may also list shares there, while luggage firm Samsonite and Italian motorcycle maker Ducati are also reported to be planning Hong Kong share listings.

They follow the footsteps of French skin care firm L’Occitane, which raised about A$700 million selling shares to investors in an initial public offering (IPO) in Hong Kong late last year, becoming the first French company to be listed in Hong Kong.

These foreign companies listing in the region are doing so because they expect a substantial part of their sales to come from the region. Selling shares in Hong Kong acts as a great marketing tool, as well as an effective way to raise funds for expansion.

Greater China now makes up around 15% of global luxury sales. With increasing incomes this figure is expected to grow to 44% by 2020. Over the next decade, China itself is expected to become the world’s single largest market for luxury goods, worth A$100 billion, up from $12 billion in 2010, according to a recent report by Asia-focused research firm CLSA. One reason is that luxury handbags, clothing, watches and jewellery are a favoured way for Chinese to display their increasing wealth – wealth that has risen due to their fast growing economy.

Prada already generates more than a third of its sales in Asia and has 14 stores in nine Chinese cities and a further eight outlets in Hong Kong; while Coach has 58 stores in China, Hong Kong and Macau.

Such high profile listings have transformed Hong Kong into the world’s biggest IPO market. It has been the world’s biggest market for IPOs for the past two years, eclipsing other major financial centres that have suffered in the aftermath of the global financial crisis.

Hong Kong has long been the place to list for Chinese firms seeking to raise funds from overseas, but it is only recently that companies from elsewhere have come to those with the money.
While the number of IPOs in Asia is strong, the number of them has dropped off slightly from the record amount raised late last year. This is because Asian investors are quick learners and realise that not every stock continues to rise after its listing. Investors are, rightly so, becoming more selective.
Higher wage growth over recent years, coupled with Asian governments increasing the social safety net, has resulted in the rise of the Asian investor. More investors are looking towards capital markets to park their money. For China in particular, we expect to see further developments in RMB-denominated IPOs.

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