Emerging Market IPOs: Leading the way

Two years ago, as financial markets in the United States and Europe began to break down, there was much speculation over whether emerging markets would continue to grow in spite of the woes in the West. A year ago, this idea of decoupling was quickly dispelled.

As emerging markets rebound from the crisis, will there be a new decoupling, where they grow, and OECD economies struggle? It is probably too early to tell, but in one area, IPOs, developed economies are profiting from emerging market successes.

In spite of the crisis, emerging market IPOs have been performing strongly this year. Morgan Stanley estimates that Asian issuances could reach $100bn in 2009. Chinese IPOs alone have raised four times as much capital as IPOs in the United States and Europe. 

This rise in IPOs is not limited to Asia. In Brazil, Santander plans to conduct the country's largest IPO, issuing between $6.4bn and $7.3bn worth of shares. The Spanish bank plans to invest the proceeds in expanding its Brazilian presence. 

These IPOs are bringing a renewed confidence not only to emerging markets, but also to mature economies. Reuters reports that the US is riding the coattails of these emerging market successes:

This week is slated to be the biggest for initial public offerings in the United States in nearly two years -- and some say the resurgence could be sustainable.

There are eight deals on deck and they are expected to raise $3.5 billion, which would increase 2009's total so far by 66 percent. In an additional sign of strength, they run the gamut from real estate investment trusts created to buy toxic assets to a clean tech company that has never made a profit.

That broadening of industries shows how much the IPO market has healed since a six-month virtual drought ended in February, with the recovery in the IPO market that started in China and Brazil making its way to the United States (emphasis mine).

As far as IPOs are concerned, faith in emerging markets has begun to convince investors to take risks in developed economies. Let's hope that the decoupling myth remains just that, a myth.