CFA Society Singapore
SINGAPORE (Dec 17): Following a strong year of merger and acquisition (M&A) activity – largely thanks to Nesta Investment Holdings’ US$11.6 billion buyout of Global Logistic Properties (GLP) – Singapore is forecast to see a modest cooling in total M&A, from US$36 billion this year to about US$26 billion in 2019.
This is according to Baker McKenzie’s new Global Transactions Forecast 2019 report, which is based on forecast macroeconomic indicators from Oxford Economics along with insights from Baker McKenzie partners in 42 markets worldwide.
The forecast predicts macro drivers to cool global markets in 2H19, such that M&A value falls from US$3.1 trillion this year to US$2.9 trillion in 2019.
Within Asia Pacific, it anticipates much of the momentum this year to be maintained into 2019 despite slower world trade growth, with globally emerging markets looking less vulnerable to rising Fed rates in the past.
In a press release on Monday, Baker McKenzie says the projections for deal activity cooling in Singapore reflect the city state’s particular exposure to a global trade war.
Nonetheless, the firms sees scope for a rebound from Singapore’s relatively weaker domestic activity in 2018 with the prospects of strong domestic demand.
Total IPO transaction values in Singapore are also forecast to improve to almost US$3.8 billion in 2019 from US$530.2 million this year.
Baker McKenzie cautions that ongoing trade tensions nonetheless continue to pose a threat to initial public offering (IPO) activity in general.
"Unless the US-China trade conflicts can be resolved soon, this will have a negative impact on IPO activity. In part, this is because the trade wars may negatively affect the business prospects and valuations of IPO candidates, but this is also because the trade wars are having a negative impact on stock markets overall, which is causing some IPOs to be delayed, or to occur at lower valuations," comments David Holland, Baker McKenzie's Asia Pacific Head of Capital Markets.
Based on the firm’s Transaction Attractive Indicator score, which ranks key economies in terms of attractiveness in current environment for M&A and IPO activity, Singapore comes in second in the Asia Pacific region after Hong Kong with a score of 8.7.
The latter economy tops the list with a score of 8.9, and is notably the region’s No. 1 performer in 2018 for IPOs despite ongoing US-China trade headwinds.
"Hong Kong remains an attractive IPO market for many issuers — not only does it help raise their profile in the Asian market, but it also facilitates their expansion plan in Asia,” says Ivy Wong, a Capital Markets Partner in Baker McKenzie's Hong Kong office.
“In addition, with the high liquidity of securities trading in the Hong Kong stock market, it also makes post-listing financing relatively easy and promising.”