LSEG: Mergers and acquisitions in the Asia-Pacific region in the first seven months amounted to only $282 billion, hitting a new low in more than a decade.

LSEG trading expert Elaine Tan and IFR Asia editor Daniel Stanton discussed the trading trends in Asia. In the first seven months of 2024, driven by large domestic trading in the United States, announced mergers and acquisitions (M&A) activity has seen a revival, leading to a 16% increase in global M&A activity. In contrast, the M&A market in the Asia-Pacific region has not experienced the widespread recovery seen in other Western markets, with M&A activity decreasing by 18% to only reach $282 billion, the lowest total in over a decade for the region. While most regions around the world have seen double-digit growth, announced M&A deals in China have declined by 23% year-on-year. This is a major factor contributing to the slowing growth of the overall M&A market in the Asia-Pacific region. Compared to the first seven months of 2023, besides the slowdown in the Chinese M&A market, other regions in Asia-Pacific have also experienced similar situations. M&A activity in Australia decreased by 22%, in Japan by 10%, and in Southeast Asian countries by 14%. Highlights in the Asia-Pacific M&A activity include India's M&A growing by 1.1% and Japan being the fourth most active country globally in cross-border transactions. Japanese companies are particularly active in Southeast Asia, with Singaporean targets accounting for the majority of Japan's outward activity, followed by Thailand and Malaysia. As some Southeast Asian countries push for infrastructure and communication development, M&A activity in related industries is increasing. For example, the second-largest transaction in the Asia-Pacific region this year so far is the acquisition of Thai mobile operator AIS valued at $6.5 billion. Meanwhile, the positive sentiment among consumers has also driven an increase in retail-related M&A deals in the region, including the largest announced transaction in the region - the acquisition of Chinese company Dalian New Union Commercial Management Co., Ltd. for $8.3 billion. Although private equity firms have been behind some of the largest deals in the region so far this year, pushing total acquisitions to $58 billion and accounting for 21% of the total M&A value, showing that such investors are likely to maintain strong investment momentum in the coming year. However, the number of transactions supported by financial institutions has decreased by 45% to its lowest level since 2020. Chinese companies account for 42% of all acquisition activities in the Asia-Pacific region, with a total value of $24 billion. Caution in the Stock Market The stock markets in the Asia-Pacific region have also seen a similar weak performance, with fundraising falling by nearly a third compared to the first seven months of 2023. In the early 21st century, the Greater China region accounted for over two-thirds of stock issuances in the Asia-Pacific region, but now it is close to one-third. Trading fervor in other places is also waning, such as in Taiwan, China, where the artificial intelligence-driven stock boom seems to be fading. Indonesia was once one of the most active IPO markets in the region, with a series of companies related to electric vehicles, but as reports of declining international electric vehicle orders surface, market enthusiasm is waning. In contrast, the stock market in India shows promise, with many large tech companies listing on the Indian securities market from places like the United States and Singapore, a practice known as 'reverse speculation,' as valuations in overseas markets slump, causing convergence in markets and making the domestic market relatively more attractive. Other promising developments include the liberalization of trading rules in South Korea and Japan, which seems to be unlocking value and liquidity. However, South Korea has also made bulk trading more complex by implementing stricter transparency rules. Equity Capital Markets in the Asia-Pacific Region Bond Markets Rebound, but Underwriting Fees Still Decline The G3 bond issuance in the Asia-Pacific region (excluding Japan) has rebounded by 27% from the low in 2023, reaching $49 billion. Chinese issuers are choosing domestic financing to take advantage of low costs of renminbi bonds. In the first seven months of this year, bond issuance in Greater China grew by 28% to $49 billion, although this only accounted for one-third of issuance in the same period in 2019. High-yield bond issuance has exceeded $7 billion, surpassing the total issuance of $5.5 billion for the whole of 2023. Elsewhere, the Australian dollar is increasingly favored by borrowers in the region, with companies like Nestle and various provinces in Canada financing in Australian dollars, abandoning the pound and the Canadian dollar. Unsurprisingly, in the first half of 2024, investment banking fees in the Asia-Pacific region have dropped by nearly a quarter to $9 billion, the lowest income level since 2017. Fees related to bond issuance fell by 4% to $5.6 billion, while equity underwriting revenue plummeted by over half to $1.6 billion. Advisory fees for M&A transactions dropped by a quarter, failing to reach the billion-dollar mark. Meanwhile, China remains the largest investment banking market in the region, holding a 60% market share and ranking as the second-largest market globally.