Corporate Financing Analysis - Andean IPO Near-Silence To End In 2018 - 27 NOV 2017

The fortunes of Andean IPOs appear to rise and fall in an inverse relationship with issuance of first time share sales in Brazil, and this has seen activity on the Latin American Integrated Market (Mercardo Integrado Latinomericano), or MILA as it is otherwise known, struggle in the 2017 y-t-d while issuance in Sao Paulo has been rebounding. BMI acknowledges that IPO activity in Brazil has certainly surprised to the upside in 2017, with the country having hosted nine float deals worth a combined USD3.9bn. However, with the macroeconomic backdrop in Latin America's largest economy looking increasingly negative, and with conditions in the trio of Andean nations of Chile, Colombia, and Peru which combine to make up the MILA bourse looking increasingly positive, we note that they are ready to take up the slack left by the downturn in listing activity in Brazil that we are expecting in 2018.

More specifically we expect the Andean exchange to lure back some of the activity which has been leaving the local market to float elsewhere over recent years. A primary example of this was with Colombian financial services provider Grupo Aval Acciones y Valores (or Grupo Aval as it is more commonly known), which floated with a USD1.1bn deal in the US instead of in its home market ( see ' Colombian Lender Lists In New York ' , October 1 2014). More recently in 2017, we have seen Colombia-based pharmaceuticals firm Biotoscana pass over the MILA to instead go public in Brazil with a USD417mn deal. In our view, the return of floats to the local market, and an increase in issuance more broadly, would serve to both strengthen the reputation of the local MILA bourse and increase liquidity at the same time.

Brazil's Temporary Return To Popularity

Brazil Back On Top In 2017
2017 Y-T-D Latin American IPOs, By Deal Volume
Source: Latinvex, BMI, accurate to October 11 2017

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