IFR Asia Awards 2018

The end of 2018 may not feel like much cause for celebration in Asia’s capital markets, but it would be a mistake to overlook the tremendous achievements of the past 12 months.

After a slump in emerging-market currencies took hold over the summer, many market participants were left waiting for the end of the year to reset expectations. Investors who did well at the start of 2018 soon found themselves reeling, as higher dollar rates and fears for trade growth brought their portfolio values back to earth with a bump.

Despite this tough backdrop – at least in the second half of the year – Asia’s capital markets took some enormous steps forward in 2018.

Hong Kong ushered in reforms to bring its listing regime into the 21st century, and found immediate rewards with a string of major IPOs from technology companies with dual-class shares and biotech developers without a profitable track record. While secondary performance has been tough in some cases, the new framework will serve the entire market well in the long run.

China also began laying the foundations for an overhaul of the domestic equity capital markets, with plans to introduce basic international standards such as market-driven pricing and a registration-based system through a new Shanghai technology board. Reforms in the Chinese bond market have been arguably even more significant, with renminbi securities poised to enter global indexes in 2019.

Beyond Greater China, Asia’s frontier markets also took some important steps forward in 2018. There were bond market debuts from the Papau New Guinea government and from Cambodia’s corporate sector, while Vietnam’s stock market welcomed major international investors – and some big new listings.

The outlook for 2019 is far from clear, with questions lingering over China’s continued growth as a trade spat with the US threatens to spiral out of control and as regulators crack down on excessive leverage in the financial system.

After some tough months over the past year, however, much of the froth has already gone. Most recent financings have relied on real demand from international institutions, rather than leveraged orders from China’s corporate sector, and the exuberant acquisitions of recent years have all but vanished. That should limit the downside from this point, assuming there are no more nasty surprises.