JPMorgan Chase & Co. (JPM:US) said initial share sales may account for less than half its China investment banking revenue in 2012 as more companies opt to raise funds from the bond market to take advantage of lower interest rates.
Initial share sales had been more than half of investment banking revenue in “recent years,” Fang Fang, chief executive officer of China investment banking for JPMorgan, told reporters in Beijing yesterday. “This is the year that we did not have many elephant IPOs.” By contrast, greater numbers of companies are selling debt, he said.
Chinese companies have sold fewer shares and more bonds as policy makers cut rates to bolster economic growth. Yields on dollar-denominated debt sold by Chinese companies fell to a record low of 5 percent on Nov. 7, according to JPMorgan Chase indexes. Chinese companies have raised $15.2 billion from overseas equity sales so far this year, 38 percent less than a year ago, according to data compiled by Bloomberg.
JPMorgan helped Haitong Securities Co. (600837), a Chinese brokerage already listed in Shanghai, raise HK$13 billion in a Hong Kong stock sale in April, near the bottom of a range marketed to investors. The New York-based bank this month also helped Baidu Inc. (BIDU:US), operator of China’s most popular search engine, sell $1.5 billion of bonds.
Chinese corporate bond sales tripled domestically in the first 10 months this year to more than 1 trillion yuan ($161 billion), according to data compiled by Bloomberg. IPO proceeds fell by more than half to 98 billion yuan, the data show.
The volume of business at JPMorgan’s investment banking unit in China has climbed this quarter and will continue increasing in early 2013, Fang said on Nov. 8.
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