The property IPO market in Asia may moderate towards the end of 2011, as governments attempt to cool property prices and equity markets become sluggish, according to a senior executive at HSBC.
“I don’t expect a lot of straight equity to be raised by developers for the remainder of this year if valuations stay where they are,” said Jason Kern, MD and Head of Real Estate and Lodging Advisory for Asia Pacific at HSBC.
“I think IPOs for property developers in China for the most part may have to wait until some shift in the regulatory pendulum back at least to a neutral stance from a tightening stance.”
The Asia Pacific REIT (real estate investment trust) segment had a market value of US$188 billion in April, almost thrice the US$66 billion in 2009, said industry group Asia Pacific Real Estate Association.
This year, the region has witnessed some large listings, with Hui Xian REIT in Hong Kong raising 10.48 billion yuan (S$2 billion) and Mapletree Commercial Trust in Singapore raising S$898 million.
Sharp increases in residential prices have caused governments in Asia to be tough on the sector, creating uncertainties about the impact of these measures.
Kern noted that investors are now looking for more liquidity, which poses more difficulties for new issues.
“If you are thinking about an IPO, it’s very important to make it as big as possible,” he said.
“A lot of global investors tell us that they want to have US$5 million of average daily trade volume, for example, to have enough liquidity to feel comfortable that they can manage their positions and get out when they want to get out,” he said.
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