Exclusive interview: Citi's Asia ECM co-heads

Andrew Tjaardstra, editor of FinanceAsia, recently caught up with Udhay Furtado and Kenneth Chow, co-heads of Asia equity capital markets (ECM), Citi, about the challenges and opportunities in the region’s equity markets. 

Chow (pictured right) and Furtado (pictured left), both based in Hong Kong, have been in their positions since around the beginning of Covid-19, so markets and the workplace have not been anywhere near normal, with multiple travel bans and restrictions at working from the office. Also, the pandemic was marked by record low interest rates and stimulus measures, which are now long in the memory. 

Furtado said to FA : “During Covid-19 you had a stimulus which helped the markets. However, it was a strange time to manage teammates across the region who you didn’t see in-person – we have teams across the region including India and South Korea. Now the repercussions have been higher rates and an 18-month hibernation for global ECM, however, we were starting to see it turn at the end of last year.”

Chow added: “It was the worst of times and the best of times. In a boom market any deals can get done, but in more challenging markets deals are much harder to execute. As a bank you need to decide what kind of deals you take on, and be nimble and flexible. However, there are always opportunities in Asia, such as convertible bonds and block trades currently. We managed to navigate these times and continue to be very active across the region.”

With a diversified team across the region, Citi led the IPO market league table in Asia last year amid tough competition. 

Regional IPO hotspots

2023 overall turned out to be a relatively poor year for initial public offerings (IPOs) in the region, especially in markets such as Hong Kong, Australia and China. However, there were several bright spots.

Data from the London Stock Exchange Group (LSEG) showed IPO proceeds in Japan were up 82% to $4.47 billion in 2023 compared with 2022. While India had a particularly robust end to the year. 

Furtado told FA: “Japan and India have recently emerged as IPO hotspots, while Indonesia has also seen positive momentum.”

In Indonesia, Citi helped the nickel miner Trimegah Bangun Persada (also known as Harita Nickel) pull off a listing worth $672 million on the Jakarta Stock Exchange. Moving forward, the senior note there has been an increase in activity in sectors such as renewable energy.

“There is an increasing interest in the energy transition story, including the makers of electric vehicles and batteries. We have seen deals across China, Taiwan and Korea – it is becoming as important as tech from an issuance volume perspective. Some new companies are going to IPO, while up the value chain there could be more spinoffs from conglomerates. We expect that there will continue to be a premium driven by ESG portfolios,” Furtado continued. 

India’s Ola Electric Mobility is one example of a company looking to IPO in the electric vehicle (EV) space, and is targeting a potential valuation of $8 billion. 

Furtado said: “India has seen good underlying business growth and capital formation. It is a very deep market, and historically already has one of the largest number of listings in the world. The complexity level is deepening and broadening.”

Some analysts are event predicting India could be one of the most acitive IPO markets in the world in 2024. 

IPO bounceback? 

There are a large number of companies ready to go public across Asia, but investor sentiment related to issues such as the US Federal Reserve cutting interest rates and the Chinese government stabilising the property market, could play important factors. 

“We need investors to be more rational and issuers to be more aligned with current market valuations to help the IPO market bounce back. There is a pipeline in Hong Kong that is very strong, however the challenge is around sentiment. We hope that investors start to focus on company fundamentals rather than geopolitics,” Chow said.

“Convertible bonds are cheaper alternatives to debt, and issuance volume should grow. Whilst an attractive financing alternative, there are regulatory and liquidity restrictions in some Asian markets as well as accessible cheap bank debt.” Udhay Furtado, Citi

There are other equity deals to be done such as block trades, for example, where Citi helped Korea’s e-commerce firm Coupang to a $455 million deal last year. IPOs, which are larger fee earners for banks and allow other deals to then happen, remain the key to success for equity markets. 

Furtado said: “We would love to see more IPOs across Asia this year. Block trades, convertibles, follow-ons only happen after the IPO, which are the bigger wallet earners with a longer duration and more complex execution. We want to see a balanced mix around the region.”

Convertible bonds are one such option, with Citi helping Korea’s LG Chem pull off a deal worth $2 billion. 

He explained: “Convertible bonds are cheaper alternatives to debt, and issuance volume should grow. Whilst an attractive financing alternative, there are regulatory and liquidity restrictions in some Asian markets as well as accessible cheap bank debt.”

Signs of optimism

As markets await for the US Fed to make a meaningful rate cut, it is set to be a bumpy year ahead as several large countries go to the polls, including notably the US in November and India in April/May.

Furtado said: “2024 is going to be a volatile year with the upcoming elections in the US and India, but there is a strong pipeline of deals if risk appetite returns, which will partly depend on the pace of monetary loosening” 

He continued: “India has seen more IPOs and is ahead of the pack; despite the election noise, we expect larger IPOs to come in India. We should hopefully see a pick-up in Asean including Indonesia and Singapore REITs, and more activity in Korea and Taiwan.”

He ended on a note of optimism: “There is huge potential across the region. China and Australia are still in the early gears, while India is reaching top speeds in fifth gear.”

While nothing is certain, 2024 is likely to be another busy 12 months for Citi’s Asia ECM team. 


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