Corporate Financing Analysis - Economic Growth Fuelling Korean IPO Charge - 07 AUG 2017


Despite a surprisingly slow start to the year following record IPO activity levels in 2017, the completion of new flotation deals bounced back in South Korea during Q2 and, in our view, has set the tone for a further flurry of deals set to complete on the local Korean bourse over the remainder of the year. Significantly, we highlight that this bullish view for listings flies in the face of a broader slowdown in economic growth in Korea that BMI is forecasting for 2017, thanks to this year being seen as just a blip in what is otherwise viewed as a robust upwards trajectory for growth in Korea by BMI's Asia Team. It is this broadly favourable macroeconomic growth backdrop that has paved the way for a jump in local stocks - the benchmark KOSPI (Korea Composite Stock Price Index) is up by 18.48% in the 2017 y-t-d period and by 21.35% from where it was twelve months previously - and a ramp up in local equity capital market (ecm) activity that has remained stable amid the far-reaching bout of market volatility sparked by China's economic slowdown. Furthermore, the strong track record of recent Korean floats in the aftermarket gives further impetus for firms waiting on the sidelines to go public in order to move their timelines forward and complete deals. Indeed, back in Q415, BMI noted that, in light of a number of last year's floats having performed strongly in the aftermarket, we may well see a strengthening flow of new firms tapping the local Seoul market over the coming months ( see , 'South Korea's IPO Market Back In The Spotlight' November 5 2015); so far, across the first half of 2017, this has certainly proven to be the case. Given all this, we believe that there is plenty of upside for IPO activity in South Korea for the remainder of H217 and - all things being equal - beyond into 2018.

Some Big Hitters

The numbers for South Korean IPOs from the first-half of the year indicate a strong market performance. According to EY research, IPO activity on the main market Korean Exchange (KRX) and its junior market equivalent (KOSDAQ) have combined to see the East Asian nation rank in fifth spot among global exchanges by deal value (after the US, Hong Kong, Shanghai, and Shenzhen), and in twelfth position in terms of deal volume of floats in Q217. Indeed, Korea played host to as many as 20 new listing deals which have tapped local ecm investors for as much as USD42.2bn across the first six months of the year, with four listings completed on the KRX and 16 on the KOSDAQ. We highlight that while the main exchange may have only seen four deals successfully complete during the second quarter of 2017, two of those deals were sizeable and drew sizeable investor attention to the Korean ecm arena's continued rise on the global stage. Indeed, Q217 saw the IPOs of Netmarble Games Corporation, whose USD2.3bn float was the largest deal to complete on the KRX since 2010, as well as the USD1.0bn listing of ING Life Insurance Korea.

Korea On Top
Three Largest Global IPOs Of Q217 By Deal Value, USDbn
Source: EY , BMI

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