Stars align for new wave of flourishing stock sales in Asia

Critical mass

At the current rate of transformation, we expect Asia will gather a critical mass of market infrastructure to be on a par with US exchanges in the next five to 10 years.

On a deal flow basis, the burgeoning Chinese capital market is already closing in on US bourses. Global deals are increasingly gravitating toward two centers: longstanding US venues and young but vibrant Chinese bourses.

Last year, IPO proceeds totaled $119 billion across bourses in Shanghai, Shenzhen and Hong Kong, compared to $181 billion raised in the US. Though still lagging on fundraising value, they recorded 537 listings in the same period in total, exceeding a deal count of 509 in the US.

China is progressively opening its financial markets to foreign investors, who have been piling into the country's onshore bonds and equities in recent quarters.

Inflows are set to continue, as robust economic growth and a strong renminbi persuade more funds to boost their allocation to Chinese assets.

Index compilers like MSCI and FTSE have in recent years been increasing the weighting of Chinese stocks in global equity benchmarks, further raising their appeal.

More recently, trade tensions between Beijing and Washington have been a double-edged sword for Asia's equity capital market.

On the one hand, geopolitical risks have spurred a flurry of Chinese tech firms quitting US exchanges and returning to Asia. The Eastward migration of Chinese listings will likely continue.

On the other hand, Chinese issuers have come under scrutiny after Washington barred US investors from owning shares in a number of China-based firms. This has introduced greater near-term uncertainty.

Another medium-term challenge facing Asia's IPO markets may be rules that could limit investor confidence. For instance, regulatory control over IPO pricing has been a concern among issuers and investors in China's onshore market.

We think this and other issues should be best addressed in future rounds of listing reform, encouraged by some liberalizations being piloted in areas like Shanghai's STAR Market.

However, these issues of geopolitical friction and market development need to be considered in the broader context that Western economies are facing huge pension funding gaps.

Asia may still be a long way off becoming the world's dominant listing hub, but we see its rising trajectory as clear and irreversible. However, the headlines portray the headwinds, global capital will be funding Asia's growth over the next decade.

Paras Anand is chief investment officer for Asia-Pacific at Fidelity International, a global asset manager.

The views don't necessarily reflect those of China Daily.