KUALA LUMPUR: UBS AG is bullish about the initial public offering (IPO) market in Asia and Malaysia this year, on the back of a relatively stronger Asian equity market than Europe and strong interest from investors.

Its Asia global capital markets head of equity syndicate managing director Sam Kendall said that the equitization of Asia is strong at the moment, and he foresees US$100 billion worth of IPOs to be executed by the end of the year.

"That is a conservative number. Investors are seeing a lot of opportunities in Asia as the market is strong and is not fraught by the uncertainty faced by European market. While there is some volatility here at the moment, it indicates more of an overreaction to Europe. It is seeing more sell-off and correction rather than a downtrend," he said, who is also the global head of blocks.

He added that there a lot of Asian companies who are seeking capital this year, and it would be met by investors who are hungry for more equity.

"Previous IPO offerings such as Maxis Bhd and JCY International Bhd have shown that interest from investors is strong. While we might not see multi-billion IPOs like Maxis here, there are growth stories and the market is open for them. And there are attractive companies here who are in need of capital,” he said, adding that some of the local sectors to look out for are oil & gas, palm oil and agri-commodity.

Year-to-date, Asia had continued to see more IPOs being offered compared to the European and US market.

"Year-to-date, we have seen IPOs up to US$18 billion in both Europe and US each, while Asia saw US$45 billion completed. If you look at what is coming up, The Agricultural Bank of China’s upcoming IPO is estimated between US$25 billion to US$35 billion. These are huge numbers. I am definitely very upbeat on the IPO market here,” he added.

Kendall added that despite the current market situation in Europe might have some impact on the Asian market in the past seven days, he does not expect it to spillover to Asia.

“What is happening in Europe would be contained there. The fact is that balance sheets (in Asian companies) are stronger and earnings are better than expected. Gross domestic product (GDP) here is pulling up high single-digit and low double-digit. Investors are afraid of uncertainty and there are no uncertainties in Asia,” he said.

He added that investors are simply over-reacting to the European crisis.

“Now, the market is simply overselling and over-panicking but the market always overshoot during both the downside and upside. The market sentiment in the past seven days merely indicates an over-reaction to the crisis,” he said.

On the local front, its Singapore and Malaysia chairman and head of investment banking Keith Magnus said that there would be a lot of foreign interest in Malaysia in the next 12 to 18 months, due to the pedigree of companies here.

“Volatility in the market aside, there will be a lot of interest in Malaysia going forward due to strong credit story and solid finances. Secondly, there has been a lot of government initiative to attract foreign investors in addition to quality of growth companies here,” he said, adding that the stronger Ringgit currency makes it more attractive for investors in comparison to weakening Euro and pound.

In addition to oil & gas and agri-commodity, Magnus said that there are also some possible IPO movements in the electronics and engineering sectors.

“These are the markets that are most attractive and in need of capital to take it to the next level,” he said.

“Given these factors of strong credit, good governance and political context, good efforts to attract investors, and quality growth companies, we think Malaysia in the next year or so would attract a lot of foreign interest if the companies choose to come out,” he said.

UBS is a leading international bank that has executed some of the biggest IPOs in Malaysia including Maxis Bhd and JCY International valued at US$ 3.3 billion and US$205 million respectively.

It is also the financial advisor to Astro All Asia Networks on its privatisation by Astro Holdings, and had initiated strategic collaboration between Bursa Malaysia and CME Group. Since 2003, it has completed 39 investment banking spread across capital markets, advisory and merger & acquisition.

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