There have been a record number of initial public offerings (IPOs) in the Asia Pacific this year, with nearly 200 IPOs worth over $50 billion being snapped up by investors during the past three months alone, according to Fidelty.
“This is a great indicator of how exciting and dynamic the economic environment in Asia is. One of the largest floats in the world this year was a $22 billion IPO in China,” Fidelity’s Asia Fund portfolio manager David Urquhart said.
“There are still many young companies that have exciting earnings growth prospects and they are raising capital for the first time. This will help them fund the growth they expect from their businesses over the coming years.”
Urquhart said the demand for Asian shares has been very strong, with many of these IPOs being many times oversubscribed.
“Demand is not just from international buyers seeking increased emerging market exposure, it is also coming from an increasing number of domestic investors,” he said.
“As people in Asia become more affluent and the middle class grows, they are not just buying televisions, cars and consumables – they are also starting to invest in shares.
“There is a strong savings culture in many parts of Asia, especially for children’s education, and shares are increasingly being recognised as a savings option.”
As result, Urquhart said the market capitalisation of Asian shares is growing at a time when it’s stagnant in many other parts of the world.
“We are seeing Asian markets become an increased component of various global and regional indices. This will then lead to index managers having to invest more in the region,” he said.
“Active investors can get in ahead of this and should be looking at factors other than global index weights when deciding how much to invest in Asia. Factors such as the percentage of global growth that is expected to be driven from Asia should also be considered.”
