source from: wsj website
MARKETS
China’s Equity Capital Markets a Boon for Bankers in a Wild Year
After a stunning first half, the summer’s stock-market fall and IPO crunch still didn’t erase all gains for equity capital markets, which are up 2.8% from last year.



Companies listing on Shanghai’s stock exchange, pictured, raised 16.8 billion dollars  collectively in the first half of 2015. PHOTO: BLOOMBERG NEWS

By JULIE STEINBERG and  KANE WU
Dec. 22, 2015 6:05 a.m. ET
15 minutes ago

HONG KONG—For bankers in China, there was nowhere to go but down after the torrid first six months of the year. And down they went, some falling so far they ended up the subject of government investigations into the causes of the summer stock-market crash.

Still, thanks to a modest fourth-quarter rebound and stunning numbers posted in the first half, 2015 turned out pretty well for the region’s equity capital markets bankers, who focus on initial public offerings and stock sales.

For 2015 to date, equity capital markets in Asia generated 6.23 billion dollars  in revenue, up 2.8% from 2014, even including the blockbuster fees banks took home from Alibaba Group Holding Ltd.’s 25 dollars  billion IPO in September 2014. The first six months of the year allowed some banks to “squirrel away nuts for winter,” a senior investment banker in Hong Kong said.

The second half was dismal though. Revenues from new listings in the third quarter totaled just 159 million dollars , down 83% from the second quarter and 78% from a year earlier. Excluding fees from the Alibaba IPO, which listed in last year’s third quarter, revenue was down 63% from the same period a year earlier. Second-half revenues across IPOs and other products were down 25%.

In China, the numbers were even more stark. Companies listing on China’s main Shanghai bourse raised 16.8 billion dollars  collectively in the first half of 2015, before regulators halted IPOs in July as part of an effort to calm markets. After regulators let IPOs resume at the end of the year, another 700 million dollars  had been raised by nine companies, according to Dealogic, with a few more set to list by year-end. The total amount, 17.5 billion dollars  so far, is already the highest since 2008.

The Asia-Pacific market is poised to remain the biggest equity capital market in the world this year, with total deal value reaching 345.17 billion dollars  so far. That total exceeds the Americas market, which recorded a year-to-date value of 278.01 billion dollars . It also surpasses the market encompassing Europe, the Middle East and Africa, which has logged 277.76 billion dollars  so far this year.

Even as China’s market was recovering, the government launched a harsh crackdown on bankers and traders deemed responsible for its crash. Citic Securities Co., China’s most important investment bank, was targeted by investigators. At least a dozen top executives were detained and its longtime chairman has stepped down.

After all the drama in the first half, the fourth quarter turned out to be the most important for the outlook into next year. Investors didn't embrace the offerings, which tended to price at the low end of expectations, and some needed the help of big cornerstone investors to get off the ground. Offerings by China International Capital Corp. and Everbright Securities Co. were delayed from earlier quarters, and CICC had to cut the size of its float.

Investors and companies will likely stay cautious early next year, when offerings will likely start off slowly and cautiously but could pick up if Beijing steps back a bit. IPO reforms could begin in May, allowing companies to list based on their merits, rather than requiring government approval.

Banks started to see some pickup in activity after Beijing lifted restrictions on trading. “Once regulator restrictions eased, we saw the kinds of deals we were getting done in the second quarter,” though fewer of them, said Damien Brosnan, Asia head of equity syndicate and equity-linked origination at UBS Group AG.

The Chinese regulator is likely to modestly increase IPO activities, according to Deloitte China. That will translate into about 380 to 420 new listings, raising 230 to 260 billion yuan (36 billion dollars  to 40 billion dollars ) in China’s domestic market next year. Deloitte expects Hong Kong to complete 115 to 125 new listings, raising 260 billion to 280 billion Hong Kong dollars (US 34 dollars  to US 36 billion dollars ) in 2016.

Total value of potential IPOs has already exceeded US 30 billion dollars , according to bankers involved in the deals, including a US 10 billion dollars  float for Postal Savings Bank of China, peer-to-peer lender Lufax’s listing worth up to US 5 billion dollars  and Taikang Life Insurance Co., which hopes to raise US 2 billion dollars .

Global investors who focus on Chinese stocks listed in Hong Kong will likely be interested in “more consumer-oriented sectors like fintech, insurance and health care,” said Aaron Arth, head of equity capital markets for Goldman Sachs Group Inc. in Asia ex-Japan.

Banks are also expected to reap revenues from Chinese companies listed in the U.S.—particularly in the technology, media and telecommunications sector—that are looking to be taken private and later relist back home. Such companies are hoping to benefit from higher valuations on the mainland.

Some 27 Chinese companies listed in the U.S. have announced plans to go private so far this year, with a total transaction value of US 33 billion dollars , a record level that is higher than the previous six years combined, according to Dealogic. Deals are moving ahead, bankers say, even though companies are unlikely to benefit from the sky-high valuations seen in China earlier this year, when such transactions became popular.

Despite the tumult, Hong Kong will regain its crown as the world’s leading stock exchange for initial public offerings this year for the first time since 2011. As of Dec. 22, 82 companies had listed on the main board of the Hong Kong stock exchange, raising 33 billion dollars , according to Dealogic data. That beats New York, which was the world’s No.1 last year. Only 53 companies have gone public on the New York Stock Exchange this year, down from 118 in all of 2014, with the total equity raised down 74% from last year’s total of 74.2 billion dollars .

Other Asian exchanges have offered bright spots. Tokyo saw some of the world’s biggest IPOs by value this year as the listings of Japan Post and its two financial units raised 12 billion dollars  in total.

Southeast Asia, which had been a strong area for banks in the first few months of the year but which sputtered in the latter half of the year, is “poised for a bit more activity,” in coming quarters, said Mr. Brosnan of UBS.

Write to Julie Steinberg at julie.steinberg@wsj.com and Kane Wu at kane.wu@wsj.com