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Investment bankers jet along in face of jittery markets

(SINGAPORE) 'I have 30 minutes because I have a plane to catch to KL,' said Philip Lee, JPMorgan's chief executive and head of investment banking in South-east Asia.
Siow Li Sen

Wed, Jun 02, 2010
The Business Times

(SINGAPORE) 'I have 30 minutes because I have a plane to catch to KL,' said Philip Lee, JPMorgan's chief executive and head of investment banking in South-east Asia.

Despite many deals being put on hold because of volatile financial markets, Mr Lee is among investment bankers who remain busy, constantly on planes to Kuala Lumpur or Jakarta.

That's because these bankers hope to get mandates from balance sheet strong or cash flush companies including sovereign wealth funds which see opportunities from nervous shareholders.

High growth South-east Asian companies are particularly sought after.

One such case was Malaysia's Khazanah Nasional's high stakes bid for Parkway Holdings launched last week. Also taking place last week was Korea's SK Telecom US$100 million investment in Malaysia's P1 Network.

Said Choe Tse Wei, DBS managing director (mergers and acquisitions): 'It's a concrete example that deals can be forged because Asian economic performance remains fundamentally strong despite the recent market turbulence in Europe.

'These deals are priced and negotiated based on forecasts going out several years. Therefore, short-term fluctuations in stockmarket sentiment do not significantly impact M&A decision-making. Aside from the SKT-P1 transaction, we are active in helping our Indonesian and Malaysian clients structure buy-side and sell-side transactions across different industries,' said Mr Choe. DBS advised SK Telecom.

Chang Tou Chen, HSBC head of advisory and deputy head of coverage for the Asia-Pacific, said the bank has a number of ongoing projects in South-east Asia - particularly in Singapore, Indonesia and Malaysia.

That's why client visits remain important when markets are choppy because 'clients want to hear what investors are thinking, and what fellow competitors and peers are doing,' said Mr Lee.

Jittery shareholders tend to accept offers if they see that markets are trending down.

Edwin Low, Credit Suisse (CS) managing director and head of Singapore and Malaysian investment banking, said capital market activity has slowed due to increased risk aversion on the investor side given events in Europe.

'Once the market stabilises, I expect an active pipeline of equity, equity-linked and debt issuances in Singapore and regionally,' said Mr Low.

'On the M&A side, strategic buy-side interests may be accelerated as the current market volatility may present attractive acquisition opportunities,' he said.

The offer by Sembcorp Industries for US-listed Cascal in April, which was at a discount, was one such strategic buy-side transaction, he said. CS is advising Sembcorp Industries.

Alvin Lim, HSBC's managing director of advisory for South-east Asia, said: 'Some clients are asking us how they can take advantage of the recent drop in the stock market. Clients are still generally optimistic about the outlook in Asia.'

Bankers also expect Singapore companies to have an edge in fund-raising, as investors prefer them in a flight to quality.

'Singapore dollar bond deals are somewhat insulated from the choppiness in the market,' said Clifford Lee, DBS Bank's head of fixed income.

But US dollar global bond issues that the bank is mandated to work on are waiting for markets to stabilise before formally moving forward, he said.

'Market demand for Asian credits remain strong. Delays in execution are only due to present market instability, which makes proper pricing of many deals impractical.'

Infrastructure projects are not affected by the volatile markets.

'On the project financing side, we are still working on a healthy pipeline of transactions in markets including Vietnam, Malaysia, Indonesia, North Asia, India and Australia, with a significant infrastructure transaction expected to reach financial close in June,' said Lim Wee Seng, DBS Bank's managing director for project finance.

'In our conversations with project sponsors to-date, we still sense strong underlying momentum for the Asian projects they are undertaking.'

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