By Dasha Afanasieva
LONDON (Reuters) - Global equity listings rose sharply in the first half of the year, compared with a year earlier, driven by the U.S. market as well as rights issues in Europe, Thomson Reuters data showed, but remained way off 2015's surge.
Stronger and calmer markets, a brighter economic outlook in some countries, as well as the avoidance of further political shocks in several European elections helped equity raising markets recover from 2016, when worries about China's economy, the British vote to leave the European Union and commodity prices discouraged potential issuers.
Companies globally issued $386.8 billion (297.3 billion pounds) of equity in the first half of this year, up 33 percent from the same period in 2016, which was the worst since 2008. Despite the rebound, issuance remained way off the highest issuance in more than 15 years in 2015 when $519.5 billion was raised.
Including some 60 initial public offerings (IPOs) and 355 follow-on offerings, U.S. companies raised $116.8 billion in equity in the first half, 46 percent more than they did in the first half of 2016.
"The United States is a stand-out: it has led in all fronts including IPOs – it started with inflationary expectations but there is also optimism about tax reform and the Fed slowly raising rates while being in control of the economy,” said Achintya Mangla, head of equity capital markets (ECM) in Europe, Middle East and Africa at JP Morgan (N:JPM) which was the top bookrunner globally by proceeds.
"Investors are being selective and they are very focused on after market trading. We will see more IPOs in Europe and the United States and underwriters need to remain focused and disciplined on pricing and secondary market performance," Mangla added.
More than a quarter of U.S. IPO proceeds were from the high technology sector. Snap (N:SNAP), the owner of Snapchat - a mobile photo app, remained the largest U.S. equity offering but was only the sixth biggest ECM deal in the world with European bank issues dominating.
Unicredit (MI:CRDI) in the first quarter and Credit Suisse (S:CSGN) and Deutsche Bank (DE:DBKGn) in the second tapped equity markets, cumulatively raising proceeds of more than $26 billion.
For the rest of the year, the market looked to a rights issue from German pharmaceutical giant Bayer (DE:BAYGn) to help raise $19 billion worth of equity capital to finance its acquisition of U.S. seeds firm Monsanto (N:MON).
Relatively, the Asia-Pacific region lagged behind with a rise in ECM volume of 7.4 percent to $95.1 billion and just one deal in the global top 10: the 30 billion yuan ($4.35 billion) convertible bond issue from China Everbright Bank in March.
EUROPEAN IPO SLUMP
IPOs in Europe declined further from 2016's slump. The oversubscribed listing of Allied Irish Banks (I:ALBK) in Dublin and London was a rare bright spot and a milestone for the Irish recovery from the economic crisis almost a decade ago.
"We're certainly not seeing the return to boom times just yet. The economy in the UK and Europe is softer compared to the United States and that may create headwinds for domestic listings," said Maegan Morrison, head of the ECM practice at law firm Hogan Lovells.
Bankers said the prospect of Britain leaving the European Union unnerved some potential issuers concerned over how Brexit could impact London's position as a global financial hub.
"For most of the international companies we speak with, in the past London would win as a listing venue. Now there's a genuine debate, Brexit is coming up in every single conversation as a source of uncertainty," a senior investment banker at a top global bank in London said, speaking on condition of anonymity.
"New York is the clear beneficiary for IPOs, and that's a problem for capital inflows into the UK."