Are public exits swinging open in Asia again?
By Paul Mackintosh - 04/03/13
In week ended February 22, Temasek Holdings unit Mapletree Investments Pte Ltd launched a real estate investment trust (REIT) – Mapletree Greater China Commercial Trust – at the top of its range, raising US$1.3 billion. Meanwhile, Temasek’s sister sovereign wealth fund (SWF), the Government of Singapore Investment Corp (GIC), reportedly sold just under 600 million shares in its warehouse operator asset Global Logistic Properties Ltd, netting some $1.25 billion. And Japan’s government is due to sell its stake in Japan Tobacco, raising a probable $10 billion, after China Petroleum & Chemical Corp secured $3.1 billion in a private placement and after Cerberus Capital Management raised some $1.7 billion in January by selling a stake in Aozora Bank.
Few stock investors will have forgotten the strong end to 2012, with the Nikkei 225 index hitting a 21-month high and the Shanghai Composite Index recovering all its 2012 losses. The combination of Asian growth prospects, recovering risk appetite, retreat from an oversold bond market, and global hunger for yield could, in theory, all make for a very persuasive case for initial public offering (IPO) prospects in 2013 – were it not for a number of stumbling blocks.
Despite the hopeful signs, investor appetite does not seem to have moved very far. The once-popular US route for China companies has been virtually closed by the residue of the Muddy Waters investigations. And to a degree, both the Temasek and GIC exercises are asset shuffling within Singapore Inc rather than bringing genuinely new stories into the market. The Mapletree REIT will plough IPO proceeds into Hong Kong and Beijing mall acquisitions from other Mapletree units. And the Mapletree IPO suggests that Singapore-based investors are still looking at China, and that well-worn favourite the real estate sector, as their returns drivers, rather than tapping other less commoditised opportunities closer to home, such as Indonesia or even Myanmar. Critically, they are also not looking beyond home-grown businesses and institutions, even if those are tapping assets outside Singapore.
And even with the dramatic late turnaround in capital markets, GPs cannot necessarily expect their listings exit prospects to rebound in step. The Ernst & Young ‘Asia-Pacific private equity outlook 2013’ warns that: “respondents expect fewer exit opportunities via an IPO in 2013, particularly in Greater China and India”. Many of those are priced around growth expectations – and those are still limited, even in China. Exits are likely to remain gradual, and often focused on marginal regional disparities in returns, such as the arbitrage between growth prospects in China and Singapore. The catalyst for really interesting change and growth in Asia’s IPO markets has still not arrived.