CBRE hires Hugh Macdonald as Apac head of capital advisers | FinanceAsia

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CBRE, a US real estate and investment firm, has appointed veteran investment banker Hugh Macdonald as head of capital advisers for Asia Pacific.

Starting his role in Sydney on November 18, Macdonald will relocate to Singapore in the first quarter of 2025, according to a company media release. 

Macdonald (pictured) is joining CBRE from Deutsche Bank, where he was most recently head of investment banking coverage and advisory for Australia and New Zealand. He was at the German bank for over 16 years, according to his LinkedIn profile. 

He has previoulsy worked at Citi, Morgan Stanley and Bankers Trust, and has experience in real estate, gaming, leisure, and lodging sectors across M&A, financing, and capital markets.  

Macdonald has originated and executed many large transactions across Apac and will report to Leo van den Thillart, global head of investment banking, and Greg Hyland, head of capital markets, Apac.

Commenting in a media release, Hyland said: “Our capital advisors business has experienced exceptional growth in Apac, raising over $3.5 billion of capital in the past 18 months. With Hugh’s established relationships, we are confident in expanding our investment banking services across the region, providing top-tier capital markets, M&A, and strategic solutions to our clients.”

Macdonald added: “I’m eager to collaborate with my new colleagues to enhance the value we provide to our clients, meeting their diverse capital requirements and driving business growth throughout the Apac region.”

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Tessa Dann to lead SocGen’s Apac sustainable finance team | FinanceAsia

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Tessa Dann has been appointed head of sustainable finance, Asia Pacific ( Apac ), effective September 14, according to a Société Générale ( SocGen ) Corporate and Investment Banking spokesperson.

Based in Sydney, Dann ( pictured ) most recently held the role as head of sustainable finance for Australia and New Zealand at SocGen, since 2023. She has experience at the Queensland Treasury Corporation as well as working in the sustainable finance department at Australia and New Zealand Banking Group ( ANZ ) for almost four years prior to joining the French bank.

In her new position, Dann reports to Paul-Antoine Thiebot, head of lasting and positive effects financing, Apac. In March, Thiebot, who has a base in Singapore, joined the French institution.

The team has recently acted as bookrunners in the Commonwealth Bank of Australia’s €1 billion ($ 1.1 billion ) 10NC5 green Tier 2 notes issuance in May 2024. It also acted as a sustainability coordinator on the conversion of Australian property firm Cromwell’s multi-bank A$ 1.2 billion ($ 811 million ) lending facility to a green and sustainability-linked loan in June 2024.

By 2025, SocGen intends to donate €300 billion to sustainable funding.

In Apac, SocGen has headquarters in mainland China, Hong Kong, Australia, Japan, India, South Korea, Singapore, Taiwan, Indonesia, Malaysia and Vietnam, according to its site.

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Blackstone and CPP Investments agree Abn AirTrunk acquisition | FinanceAsia

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Blackstone Real Estate Partners, Blackstone Infrastructure Partners, Blackstone Tactical Opportunities, and Blackstone’s private equity strategy for individual investors, along with the Canada Pension Plan Investment Board ( CPP Investments ), have agreed to acquire AirTrunk, an Asia Pacific ( Apac ) data center firm, in a deal worth around A$ 24 billion ($ 16 billion ).

The sum includes both capital expenditures for devoted projects and debt. &nbsp,

The sellers are Macquarie Asset Management ( MAM ), Canada’s Public Sector Pension Investment Board ( PSP Investments ) and other investors. In April 2020, a MAM consortium purchased an 88 % stake in AirTrunk for about A$ 3 billion. &nbsp,

While a spokeswoman for Blackstone told&nbsp, FinanceAsia it is not providing&nbsp, a malfunction of the collateral percent, CPP Investments said in a company statement that it would be acquiring 12 % of AirTrunk. CPP Investments said it has info center joint ventures and opportunities in Australia, Hong Kong, Japan, Korea, Malaysia and Singapore, in addition to the US.

The package, if completed, may be Blackstone’s largest expense in Apac. The Australian Foreign Investment Review Board has approved the exchange.

AirTrunk is the largest information centre program in Apac, with a reputation across Australia, Japan, Malaysia, Hong Kong, and Singapore. According to a statement from Blackstone, it has more than 800 megawatts ( MW) of customer commitments and is the owner of land that can support over 1GW of regional growth. AirTrunk agreed a record sustainability-linked loan ( SLL ) of A$ 4.6 billion last year. &nbsp,

Jon Gray, president and chief operating officer of Blackstone, said:” AirTrunk is another important step as Blackstone seeks to be the top digital infrastructure investment in the world across the ecology, including data centers, strength and associated services” .&nbsp,

” Digital system is experiencing unprecedented demand driven by the Artificial revolution as well as the broader digitization of the business,” said Nadeem Meghji, world co-head of Blackstone Real Estate.

They added:” Prior to AirTrunk, Blackstone’s portfolio consisted of$ 55 billion of data centers including facilities under construction, along with over$ 70 billion in prospective pipeline development. To more accede to its progress, we look forward to working with the top management team at AirTrunk.

As we get the next wave of progress from cloud providers and AI and support the energy transition in Apac, Robin Khuda, chairman and chief executive officer of AirTrunk, stated:” This deal shows the strength of the AirTrunk system in a strong performing business.”

We look forward to working with Blackstone and CPP Investments, gaining from their size money, industry experience, and extensive network across the various local markets, which will help assist AirTrunk’s expansion, Khuda continued.

This investment marks yet another milestone in our broader data center approach, according to Max Biagosch, top managing director, global head of Real Property, and nose of Europe for CPP Investments, in a speech from CPP Investments. Our infrastructure and real estate teams seamlessly collaborated to underwrite this investment, which is a great example of close collaboration across the fund.

According to a statement from Blackstone, approximately$ 1 trillion in US capital expenditures will be expected over the next five years to be made to build and facilitate new data centers, and another$ 1 trillion in US capital expenditures will be made, according to a statement from the company. &nbsp,

Blackstone has invested in both the debt and equity of other data center companies, including&nbsp, QTS, Coreweave and Digital Realty. &nbsp,

The Hanam Data Center was acquired by Macquarie Asset Management via Macquarie Korea Infrastructure Fund earlier this year in the Greater Seoul Area of South Korea. The sale price was KRW734 billion ($ 530 million ), however, including the transaction cost and additional capital required to complete the remaining mechanical, electrical and plumbing works at Hanam IDC, the total sale size was KRW918 billion.

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Blackstone and Canada Pension Plan Investment Board agree bn AirTrunk deal | FinanceAsia

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Blackstone Real Estate Partners, Blackstone Infrastructure Partners, Blackstone Tactical Opportunities, and Blackstone’s private equity strategy for individual investors, along with the Canada Pension Plan Investment Board, have agreed to acquire AirTrunk, an Asia Pacific ( Apac ) data center firm, in a deal worth around A$ 24 billion ($ 16 billion ).

The sellers are Macquarie Asset Management ( MAM ) and Canada’s Public Sector Pension Investment Board ( CPP Investments ). MAM bought a 88 % stake in AirTrunk in April 2020 for a valuation of around A$ 3 billion. &nbsp,

A spokeswoman for Blackstone told&nbsp, FinanceAsia it is not providing&nbsp, a collapse of the equity ratios. The AirTrunk will remain 12 % owned by CPP Investments, according to the statement. CPP Investments said it has information center joint ventures and assets in major centers in Apac, including Australia, Hong Kong, Japan, Korea, Malaysia and Singapore, and the US.

The package, if completed, may be Blackstone’s largest expense in Apac. The Australian Foreign Investment Review Board has approved the deal.

AirTrunk is the largest information centre program in Apac, with a reputation across Australia, Japan, Malaysia, Hong Kong, and Singapore. It owns property that will allow for over 1GW of regional development and has more than 800MW of customer commitments.

This is Blackstone at its best, according to Jon Gray, president and CEO of Blackstone.” We are using our international platform to capitalize on our highest faith design. Another significant development comes as Blackstone strives to be the world’s largest buyer in modern infrastructure, including power, data centers, and related services.

” Digital system is experiencing unprecedented demand driven by the Artificial revolution as well as the broader digitization of the business,” said Nadeem Meghji, world co-head of Blackstone Real Estate.

They added:” Prior to AirTrunk, Blackstone’s portfolio consisted of$ 55 billion of data centers including facilities under construction, along with over$ 70 billion in prospective pipeline development. To further accede to AirTrunk’s progress, we look forward to working with its top-notch management team.

The deal, according to Robin Khuda, founder and CEO of AirTrunk, demonstrates the strength of the AirTrunk program in a strong-performing field as we prepare for the upcoming wave of development from cloud services and AI and aid the transition to energy in Apac.

We look forward to working with Blackstone and CPP Investments, gaining from their size money, industry experience, and extensive network across the various local markets, Khuda continued,” We look forward to working with them.”

In a statement from CPP, senior managing director, global head of Real Property, and head of Europe, Max Biagosch, stated:” This investment adds another step to our broader data center plan, further expanding our footprints in the region for the benefit of CPP donors and beneficiaries. It is also a fantastic illustration of close collaboration between the fund’s infrastructure and actual estate teams working smoothly up to underwrite this investment.

According to a speech from Blackstone, approximately$ 1 trillion in US capital expenditures will be expected over the next five years to be made to build and promote new data centers, and another$ 1 trillion in US funds expenditures will be made, according to a declaration from the company. &nbsp,

Blackstone has invested in the debt and equity of several other data centre firms, including Coreweave and Digital Realty, the fastest-growing data center company in the world, and QTS. &nbsp,

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FinanceAsia Achievement Awards 2024: entries are now open | FinanceAsia

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FinanceAsia’s annual Achievement Awards recognises excellence in bringing together those issuers, banks, investors, advisors and other market participants, who are working hard to develop and expand Asia Pacific’s (Apac) financial markets.

This year, for the first time, we are also looking to recognise excellence in the fast-growing markets of the Middle East.

We are looking to recognise the standout companies and strategies that are redefining the way issuers and investors are interacting with markets and adapting to evolving regulatory requirements and diverse needs, amid an increasingly competitive environment.

There are both Deal awards and House awards across a range of categories and markets. For more details please see here for Apac and here for the Middle East. 

In addition, our Deal Maker Poll rewards individuals who have been instrumental in closing some of the region’s most ambitious deals over the last 12 months.

The timeline for the deals is October 1, 2023 to September 30, 2024.

We look forward to your participation and seeing your entries! Please click here to find out how to enter at our dedicated Awards website. For frequently asked questions click here and for list of our experienced judges see here. 

Key dates: 

August 19: Awards’ launch

Early-bird entry deadline: September 6, 2024

Main entry deadline: September 19, 2024 

Entries’ evaluated by judges: October 2 to November 6, 2024 

Winners’ announced: November 2024 

Awards’ ceremony: February 2025, date TBD  


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Sustainable transformation: making transition finance stick | FinanceAsia

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The Asia Pacific region is currently facing a significant gap in the race to fund decarbonisation – estimated at $US1.1 trillion by the International Monetary Fund (IMF).

However, this is not the only problem for a region whose coal-fired economies represent around half of global emissions, according to the International Energy Agency.

China alone accounts for 35% of global CO2 emissions, the agency says.

Speakers at the Sustainable Finance Asia Forum 2024 said that regulators will need to rebalance sustainable investment priorities – placing more emphasis on adaptation rather than mitigation – if the region’s most heavily polluting emerging economies are to meet their carbon zero targets.

Debanik Basu, the head of responsible investment and stewardship APAC at APG Asset Management, told a panel on harnessing transition finance for sustainable transformation that investment in mitigation (reducing greenhouse emissions at source) now represented the majority of transition funding.

He said the often more complicated task of climate adaptation – the need to change systems, behaviours and whole economies – was receiving scant attention.

“Currently the region is getting around $300 billion in transition finance so there’s a massive gap that needs to be addressed,” he told the conference. “Even within the small portion of finance that we are getting, more than 80 per cent of the funds are moving towards mitigation.

“Consensus estimates suggest that ideally it should be 50/50 between mitigation and adaptation.”

He said the other critical problem was that aspects of climate finance were not well understood and appreciated by the market overall, in particular within the agriculture and forestry segment.

“When you look at the NDCs (Nationally Determined Contribution) put out by a lot of countries, there are specific targets around climate change, but there aren’t explicit targets around forestry and agriculture,” he said.

“And even when there are targets, there is no clear roadmap. What all this means is that the institutional capacity is lacking. There are gaps in infrastructure and there are gaps in knowledge.

“As an investor, conversations with companies around biodiversity are at a very nascent stage.”

A question of taxonomies

Kristina Anguelova, senior advisor and consultant on green finance strategy APAC at the World Wildlife Fund, told the conference that regulation was moving in the right direction, guided by hubs such as Singapore and Hong Kong.

She added that the unofficial rivalry between Hong Kong and Singapore in terms of developing regulatory taxonomies was having a positive effect on the transition finance landscape in the region.

“I think the competition between Singapore and Hong Kong in this case is a good thing because it’s advancing regulation in the region quite a bit,” she said. “The Singapore Asia Taxonomy lays out transition taxonomy criteria across eight sectors.”

While the regulation is tailored to Singapore, she said she believed it would lay foundations for others to follow.

“It’s so important as a regulatory piece because it can serve as an incentive for investors to start to scale transition finance comfortably and confidently without the loopholes and the risks of potentially being accused of greenwashing,” she said.

In terms of biodiversity, she highlighted the nascent stage of biodiversity finance compared to climate finance, discussing the need for capacity building, regulatory clarity, and financial instruments to support nature-based solutions.

A case in point, she said, is the International Sustainability Standards Board (ISSB) which is developing standards aimed at developing a high-quality, comprehensive global baseline of sustainability disclosures focussed on the needs of investors and the financial markets.

“On biodiversity, I think we’re moving a bit slowly, but we’re getting there. Obviously coming from a science-based NGO, efforts can never be fast enough,” she said. “But the good news is that the ISSB will also be integrating the TNFD or the Task Force for Nature-related Financial Disclosures soon.

“Those jurisdictions that have adopted or committed to the ISSB will also be adopting those nature regulations.”

The challenge as always, she added, was that regulators had to strike a balance between mitigating financial risk and overregulating such that it slowed economic development.

Blended solutions

Building capacity, both speakers argued, would be critical to transition finance solutions to climate change and that new instruments, particularly in blended finance, were likely to be leading the charge.

“We are seeing beyond transition bonds to different types of instruments that are designed to go into blended finance structures such as transition credits which are based on the assumption that we can get carbon savings out of early retirement of coal-fired power plants,” Anguelova said.

One avenue that was currently being explored in a number of jurisdictions was concessionary capital: i.e. loans, grants, or equity investments provided on more favourable terms than those available in the market.

These terms could include lower interest rates, longer repayment periods, grace periods, or partial guarantees.

Of these instruments, Basu said, guarantees were evolving as one of the methods currently being pursued in several markets.

“What we are also seeing is that, apart from concessionary capital, a lot of public institutions are more comfortable with providing guarantees instead of direct capital because that then keeps the overall cost of capital down,” Basu said.

“It might be at a very nascent stage – and it is difficult to say if this is going to be the future – but it is developing,” he said.


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BlackRock tasks Yik Ley Chan to lead SEA private credit as demand increases | FinanceAsia

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Global investment giant BlackRock has appointed Yik Ley Chan to lead the firm’s private credit team in an expanded remit for Southeast Asia (SEA). 

Chan (pictured) will be based in Singapore and will become responsible for the origination and execution of private credit investments. The appointment takes effect next month in July, according to a company media release. He will also join the firm’s Asia Pacific (Apac) private credit leadership team. 

Chan has 16 years’ experience in financial services, of which more than 13 years were spent on structuring private credit and financing solutions. He was most recently Asia head of private credit at Jefferies, where he oversaw markets in SEA including Singapore, Malaysia, Vietnam, Indonesia and the Philippines. Yik Ley previously played a senior structurer role for Credit Suisse, covering SEA and frontier markets.

BlackRock’s global private debt platform manages $85 billion across the asset class. The global private debt team has over 200 investment professionals in over 18 cities globally as of December 2023.

BlackRock’s Apac private credit platform currently invests in opportunities throughout Australasia, South Korea, Japan, Greater China, India, and SEA.

Celia Yan, head of Apac private credit, BlackRock, said in the release: “SEA is an exciting region offering promising opportunities for private credit, as corporates look for ways to finance transformation beyond traditional avenues. Yik Ley’s wealth of investment experience and local insights will be of immense value to our clients, while strengthening our investment capabilities throughout developed and emerging markets in Apac.”

Deborah Ho, country head of Singapore and head of SEA, BlackRock, added: “Client demand for private markets investments has increased dramatically – a trend we believe is here to stay.”

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AI’s rapid evolution | FinanceAsia

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Asian listed technology stocks outperformed world indices in 2023. While lingering geopolitical worries and supply chain constraints muffled the industry’s early year outlook, the sector was buoyed by the near overnight mass adoption of generative artificial intelligence (AI).

The release of user-friendly chatbots found an immediate audience. Within two months of its official launch, ChatGPT reached 100 million monthly active users, making it the fastest-growing consumer application in history, according to Similarweb data. The popularity of the OpenAI-designed chatbot spurred other notable rivals, including Google’s Bard and graphic designer Midjourney. AI systems are now capable of producing digital art designs, college-level essays and software coding – all in just a matter of seconds.

Unsure which generative AI platform will ultimately reign supreme, investors have been adopting a “picks and shovels” approach, a mining analogy favouring equipment makers. The Philadelphia Semiconductor Index returned almost 50% in 2023. Asian tech companies followed, with the MSCI AC Asia Pacific Information Technology Index rallying more than a fifth, compared to a 10% gain for the MSCI World Index.

Looking into 2024, there is little to believe tech’s outperformance will reverse, said Mazen Salhab, chief market strategist, MENA for BDSwiss, speaking to FinanceAsia. Salhab foresees the trend continuing beyond the next 12 months, considering the urgency for corporations to leverage innovative technologies capable of addressing headwinds such as tightening labour dynamics and higher costs.

Given its technological reach, experts see generative AI’s transformative properties creating significant economic value across a spectrum of industries. Bloomberg Intelligence predicts generative AI sales to reach $1.3 trillion over the next decade from a market size of $40 billion in 2022, representing a compounded annual growth rate (CAGR) of 42%, with rising demand for AI products adding $280 billion in new software revenues. 

These numbers are hard to ignore, explained Hong Kong-based Robert Zhan, director of financial risk management for KPMG China, to FA. He added that companies harnessing AI would not only establish a competitive advantage for themselves, but would also unlock substantial client and shareholder values, enriching the entire business ecosystem.

Concentrated gains

Yet, despite the broad-based optimism, generative AI value creation has been narrowly focussed with select names. The market cap of US-listed Nvidia, the graphic processing unit (GPU) chipmaker behind chatbots like ChatGPT, tripled in 2023, breaching the trillion-dollar level and quickly becoming the industry’s benchmark for AI sentiment.

The excitement surrounding AI pushed Nvidia’s current price-to-earnings (P/E) multiple to 120 times, compared to Nasdaq’s market multiple of just 25 times, with analysts justifying AI premiums due to the sector’s rising income profile and robust sales outlook. While historical productivity cycles have often inflated speculative prices, even at the current trading multiples, Salhab doesn’t believe an asset bubble exists, arguing that visible efficiency gains are set to materialise in the near future.

Timing when those AI-related gains appear is riddled with obstacles for asset allocators. Chip designer Arm Holdings, which listed on the Nasdaq in September 2023, has been trading with a P/E as much of 200 times, nearly double that of Nvidia’s, reflecting the widening gap investors are assigning to companies with AI linked revenues.

Despite the elevated valuations, fund managers see generative AI investments as just one catalyst for the tech sector. 

The outlook is particularly promising for semiconductors, said Matthew Cioppa, co-portfolio manager of Franklin Templeton’s technology fund, in a conversation with FA. Cioppa highlights ongoing drivers such as proliferating demand for electric vehicles, internet of things (IoT), and cloud computing, noting that these technologies are at the early growth stages of their innovation, offering catalysts for semiconductor stocks.

The politics of chips 

There are also many political considerations for AI investors. 

As semiconductors serve as the underlying hardware for AI, experts say the technology will inevitably always be related to political decisions that can quickly rattle markets. In October 2023, the US tightened export controls on advanced chip sales to China, hampering Beijing’s AI ambitions and fuelling US-Sino tensions ahead of the US 2024 presidential election.

The US-China trade dispute has diminished the Chinese semiconductor market for US suppliers, acknowledged Cioppa. Although he argues that export restrictions are already priced into the market, Cioppa believes that the political fallout linked to semiconductor chips and AI technology remains a volatile factor that can never be ignored, especially when the world’s two largest economies are directly involved.

Nvidia’s share price has bucked the trend. While the company has thus far overcome trading hurdles by offering alternative chips, that balancing act appears vulnerable following the group’s third-quarter earnings announcement which mentioned a more challenging operating environment ahead. That caution is now being echoed by Nvidia’s Chinese customers who are also concerned about their own generative AI aspirations.

In late November 2023, e-commerce giant Alibaba reversed its decision to spin off its Cloud Intelligence Group, citing the US export controls of advanced Nvidia chips, while China’s Tencent said it would look to domestic semiconductor manufacturers to meet its demand. Even as Nvidia coordinates with the US government on developing approved chip designs compliant with the existing rules, the outcome and timing of decisions remains unclear.

This matters for any technical development, said KPMG’s Zhan. “[Because] geopolitics impacts which AI vendor is selected, companies will be cautious to ensure they meet local regulatory requirements, particularly across data privacy and security.”

Rapid development of Chinese-produced semiconductors may test market sentiment if incumbents like Nvidia underestimate those capabilities. While supply may meet chip demand in the current market, Nvidia believes those alternatives may not provide sufficient computing power to train the next generation of AI systems, as stated in the earnings report.

Technological challenges are also occurring alongside policymaker efforts to incubate a regulatory landscape that supports AI platforms without derailing its potential. In October 2023, London initiated a summit aimed at establishing an AI oversight committee, but soon discovered that Washington had similar intentions, reflecting a lost coordination opportunity. 

What regulations are ultimately introduced is uncertain, but it’s anticipated that numerous discussions and obstacles will arise in the years ahead, said Zhan. When asked what type of regulation works best, he shared: “I would like to compare AI to a human. Right now, AI technology is still in its infancy, so it makes sense that it should get more supervision and more controls to help it learn and grow. But as AI matures and learns, such controls should adjust proportionately according to the risk.”

It is a sentiment underscored by Franklin Templeton’s Cioppa, who said that “over time a combination of sovereign regulatory frameworks and private market solutions would effectively provide AI guardrails as not to stifle innovation or make it too difficult for smaller companies to compete with the mega cap companies on any advancements.”

2024 outlook

The uncertainties facing AI investors for the year ahead are magnified by higher capital costs such as elevated interest expenses as central bankers grapple with inflation, and also the increasing need for expensive data centres.

It will be interesting to see how AI stocks’ performance compare to non-tech companies in an overall weaker investment environment. Any company looking to bring AI into their businesses will have an expensive journey which could weigh on their earnings’ outlook.

As the market undergoes tapering, venture capital and private equity firms are adjusting their expectations. Hong Kong-based Alex Wong, head of M&A advisory at FTI Capital Advisors, told FA:

“Our clients, particularly those considering Hong Kong initial public offerings (IPOs), have recalibrated their expectations. Impacted by the weaker local market, some are exploring various alternatives at reduced exit valuations. Others are studying different listing venues, or altogether, deferring IPO plans and choosing direct exit strategies like trade sales.”

For fund managers preparing for the year ahead, these factors may bode well again for Asia’s technology stocks over non-tech names, particularly innovative companies backed by reliable cash flows and visible dividend payouts to shareholders. For investors that may mean holding onto 2023’s winner in 2024.

Peter Choi, a senior analyst at Vontobel, favours firms such as Taiwan Semiconductor Manufacturing Company (TSMC), the largest constituent for MSCI AC Asia Pacific Information Technology Index which returned more than a third to investors last year, highlighting that TMSC powers AI businesses not only for Nvidia, but also for tech giants such as Google and Microsoft.

Yet, no matter which AI-related companies lead stock market returns, the generative AI attention will unlikely fade, explained Andrew Pearson, managing director of Intellligencia, an AI and analytics company in Hong Kong and Macau.  

“Fundamentally, generative AI is anything that can be imagined even if it doesn’t currently exist, making it good marketing material inside a PowerPoint presentation or even a book,” said Pearson, who recently published The Dead Chip Syndicate. Ominously, he added: “There will always be an audience for something that carries a 10% chance of destroying the human race. It is too big to disregard at this point.”

For investors, there may be a sense of irony by sticking to the same investment strategy in 2024, as arguably the most prudent approach to capture the market upside for a constantly evolving technology, is to repeat what has worked before. Will this trade work again? We will find out over the next 12 months.

This article first appeared in the print publication Volume One 2024 of Finance Asia.


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Volume One 2024 magazine out now | FinanceAsia

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We are delighted to announce that the first volume of FinanceAsia’s 2024 bi-annual magazine, is now available for your perusal. 

In this edition, we celebrate all the winners the FinanceAsia Achievement Awards 2023 and explain the rationale behind why each institution won. In addition to the Deal and House Awards for Asia and Australia and New Zealand (ANZ); this year we added a new category, the Dealmaker Poll, which recognises key individuals and companies based on market feedback. 

 

In feature format, Christopher Chu examines the potential and reach of artificial intelligence (AI) in Asia – the fast-moving technology is presenting both huge challenges and opportunities for investors. While it remains caught in the cross-hairs of geopolitics and regulation, he examines how AI could be a game-changer for productivity.

 

Ryan Li explores the proposed breakup of Chinese giant Alibaba and how the firm’s ambitions fit in with wider developments across China’s tech sector.

 

Also in the magazine, Andrew Tjaardstra reviews IPO activity across key Asian markets in 2023 and looks ahead to how public markets might perform in 2024 – while it certainly hasn’t been an easy ride for the region’s equity markets over the last 12 months, there have been some bright spots, notably India and Japan, which are set to continue their momentum this year.

 

Finally, read Ella Arwyn Jones’ exclusive interview with Rachel Huf, the new Hong Kong CEO of Barclays. Huf shares her transition from lawyer to leader, offering insights around her career path and the strategic direction of the bank in the Special Administrative Region (SAR) over months to come. 

 

Click here to read the full magazine issue online. 

 


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Asia seeks 2024 redemption for IPOs | FinanceAsia

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After a relatively poor 2022, while some Asian stock markets performed well in 2023, such as India and Japan, others including China, Hong Kong, Singapore and Australia languished as geopolitical tensions, rising interest rates and poor performing domestic economies knocked investor confidence.

There was also a downturn in mergers and acquisitions (M&A) in Asia Pacific (Apac), with 155 deals completed in 2023 with volumes down 23% compared to 200 deals in 2022, according to WTW.

Broadly, investors were spooked by a combination of higher for longer interest rates from the US Federal Reserve, a lacklustre economic performance in China post-pandemic with the property sector dragging confidence, and wider geopolitical tensions.

Will Cai, partner and head of Asia capital markets practice and co-chair of China corporate practice at law firm Cooley, told FinanceAsia: “2023 was a very challenging year for all major capital markets in Asia, with Japan as the only exception. There were several contributing factors: the slower-than-expected post-Covid-19 economic recovery in China, the current regional and global geopolitical tensions, as well as the high interest rates.”

He added: “High interest rates have a significant negative impact on capital market deals. The logic is very simple: if treasury bonds can provide 5% annual return, risk free, investors will expect a much higher return on high-risk equity deals – which unfortunately is not what many companies can deliver in a tough market. We probably need to see a moderate reduction on interest rates before equity investors return to the market.”

Amid the gloom, other avenues in the equity space beyond IPOs, performed relatively well, with banks needing to respond to changing client needs.

Kenneth Chow, co-head of Asia equity capital markets, Citi, said: “These are challenging market conditions and as a bank you need to be nimble and flexible. However, there are always opportunities in Asia, such as convertible bonds and block trades.”

Japan and India rising

There were arguably two Asian ‘star’ performers in 2023: Japan and India.

Despite a weak yen, Japan saw a breakout from years of deflation, corporate governance reform and a solid domestic economy, while India saw strong GDP growth of around 7% and a continuation of reforms.

Udhay Furtado, co-head of Asia equity capital markets, Citi, told FA: “Japan and India have recently emerged as IPO hotspots, while Indonesia has also seen positive momentum. There is an increasing interest in the energy transition story, including the makers of electric vehicles and batteries.” 

Japan, with IPO proceeds up 82% compared with 2022, was the standout Asian market last year.

Peter Guenthardt, head of Asia Pacific investment banking at Bank of America, said: “There are many opportunities in Japan with the fee pool increasing 20% in 2023, while overall fees were down by the same figure across Apac. The fee pool was twice the size of China this year. Japan could remain the largest fee pool in Apac in 2024.”

Guenthardt added: “In Japan, there has been an increase of IPOs, block trades and convertible bonds, with that trend set to continue. There has also been a rise in activist investors – for which it is the second most active market in the world.”

He continued: “Japanese companies are also looking to expand abroad for M&A opportunities, with the US being the most popular market and where sectors such as technology are particularly attractive.”  

In India, the market saw a big improvement in the second half of the year. While many companies conducted IPOs outside of India, the local stock markets saw the number of issuers increase by over 50% to 239, according to data from the London Stock Exchange Group (LSEG). With the second half of the year doing particularly well, this bodes well for 2024, with some experts tipping the world’s fifth largest economy to lead the way in IPOs globally this year. 

Citi’s Furtado said in a media release: “We hope to see a turn in the IPO markets, as we have been seeing in India in late 2023 and we also expect to see [a] continued pick up in convertible bond activity (given refinancing efficiencies), alongside a robust follow-on/ block calendar.”

2024 Hong Kong bounceback?

One of the big questions for Asia in 2024 is can Hong Kong, one of the pre-eminent financing hubs, return to something resembling its former glory after years of protest and pandemic turmoil. Any turnaround in Hong Kong should also indicate improved confidence in Chinese equities given that the majority of companies listed on the Hong Kong Stock Exchange (HKEX) are Chinese.

PwC is predicting HK$100 billion ($12.8 billion) of deals in 2024 with around 80 deals in the pipeline, and KPMG is expecting Hong Kong to return to the top five of the IPO global rankings.

While the fundamentals are still strong in the Special Administrative Region (SAR), a recent reliance on Chinese companies, which have been buffeted by domestic headwinds and rising US interest rates, has damaged the market. In addition, the potential implications of the SAR’s new national security law have rattled global investor appetite.

However, in a sign of optimism, already in 2024, two Chinese bubble tea firms have applied for listings on the HKEX suggesting that market appetite could be rebounding in China – especially for companies supplying consumer staples.

Although stock markets in mainland China are providing stiff competition to Hong Kong, foreign investors and Chinese firms are still attracted to Hong Kong’s greater flexibility. In addition, geopolitical tensions mean that Chinese and Hong Kong firms are becoming more cautious about listing in the US.

Stephen Chan, Hong Kong-based partner at Dechert, told FA: “2023 was relatively challenging for the Hong Kong IPO market, with the number of deals and proceeds raised having declined year on year. We have seen a number of potential listing applicants choose to delay their listing timetable in view of the underperforming stock price of recent new listings.”

A sluggish stock market performance, low valuations for newly listed companies and the macroeconomic environment contributed to potential listing applicants opting for the wait-and-see approach, with the SAR facing strong headwinds.

Chan added: “The US interest rates hikes saw investors opt for products with high interest rates and fixed income.” This dampened the demand for IPOs, and in turn affected the valuation of potential IPOs and hence weakened the urge for potential listing applicants, explained Chan. 

He said: “Increased borrowing costs and lower consumer spending in general – due to the high interest rate cycle – have also affected the operational and financial performance of the potential listing applicants. Improvements to both investor sentiment towards the equity market and companies’ operating and financial performance would be essential before companies could reconsider fundraising through IPO.”

Certain sectors have been performing better than others, including technology, media and telecom (TMT) and biotech and healthcare companies. These are likely to continue to lead the IPO market in terms of the deal count and deal size in Hong Kong, especially with January 1, 2024’s HKEX regulatory reform for the new Chapter 18C (known as the GEM reforms) for specialist technology companies, and an expanding market for biotech and healthcare under Chapter 18A which was launched in 2018.

Chan added: “The HKEX has taken the opportunity to introduce a number of modifications to improve the fundraising process including the new settlement platform, FINI, which will shorten the time gap between IPO pricing and trading and hence reduce the market risk and modernise and digitalise the entire IPO process.”

“The GEM listing reform aiming to enhance attractiveness for SMEs to seek listings. . . will also boost the number of deal counts for the Hong Kong IPO market and provide SMEs with development potential a viable pathway for pursuing listing in the main board in the future.”

A continuation of the return of visitors to around 65% of pre-pandemic levels to the SAR in 2023 should also help build momentum in the local economy. In addition, the SAR has been reaching out to the Middle East for investment and is increasing its trade cooperation with Asean countries.

Asia outlook

While China appears to still be struggling to turn its economy around, Asia will continue its overall growth trajectory as the middle class grows, technology evolves and connectivity improves. The relatively young populations of Asean countries such as Indonesia, Vietnam and Thailand will also continue to provide a boon for investors.

Cooley’s Cai said: “In terms of deal counts, there were still relatively more biotech deals in 2023. Part of the reason is that biotech companies must raise capital regardless of market conditions (and therefore, the price). We also see companies from the ‘new consumer’ sectors looking to IPO. We believe these two sectors likely can do well in 2024.”

He continued: “We hope 2024 will be better than 2023, but we may need to wait a bit longer for a booming market.”

There is certainly a long way to go before seeing the region’s previous robust IPO levels.

“2024 is going to be a volatile year with the upcoming elections in the likes of the US and India, but there is a strong pipeline of deals if risk appetite returns, which will partly depend on the pace of monetary loosening,” said Citi’s Furtado.

Alongside a host of elections, there are ongoing conflicts in the Middle East and Ukraine, meaning there is much uncertainty over global supply chains, oil prices and the inflation trajectory.

While investors will be hoping that inflation can be kept under control so the US Fed can start cutting rates sooner rather than later, solid economic fundamentals and growth in many large countries in the region should provide confidence in Asia’s equity markets moving forward.

This article first appeared in Volume One 2024 of the FinanceAsia print magazine which is available online here. 


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