HSF expects this sector to drive 2020 Australian IPO market

Top-tier firm is cautiously optimistic on 2020, despite a subdued 2019

HSF expects this sector to drive 2020 Australian IPO market

Herbert Smith Freehills (HSF) has predicted that 2020 will be a positive year for the IPO market in Australia, buoyed by the continued strong performance of a particular sector. What the firm said is “cautious optimism” comes despite a subdued 2019.

In its 2019 Australian IPO Review, the global legal giant said that it expects the technology sector will fuel the Australian IPO market this year. In 2019, the sector was second only to the financial sector in both number and market capitalisation of listings on the ASX.

Further bolstering the expectation that tech will be a boost to the market, the ASX has consolidated its place as a market for IT listings both big and small, HSF said. The ASX has also introduced this year the S&P/ASX All Technology Index.

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The fintech sector has been a particularly active sector on the ASX in 2019 said Michael Ziegelaar, partner and joint head of capital markets at HSF. The ASX’s reputation for these listings continued to generate attention across the world, he said.

“We expect the IT sector to remain firmly in focus for growth investors in 2020 given its opportunities for scalability. Consistent with the trend in 2019, in Australia, IT sector listings are more likely to focus on business-to-business solutions, with ‘software as a service’ and payment systems and platforms making up the bulk of the tech listings on the ASX,” he said.

Nonetheless, the capital markets experts at HSF also observed more traditional businesses and assets continue to attract interest, Ziegelaar said. Those include the real estate, retail, resources, infrastructure, and financial services sectors.

Last year’s ASX performance was subdued, the report found, as there were significantly fewer listings, as well as lower capital raised, compared to 2018.

“A combination of factors made listing on the ASX in 2019 a challenging task, including elections in Australia and the UK, the overlay of uncertainty influenced by the ongoing trade war between the US and China, protests in Hong Kong, and the commencement of the US presidential election process,” said Philippa Stone, partner and joint head of capital markets.

Stone also shared what to look forward to this year in the capital markets of the country.

“2020 is off to a promising start, with a burst of energy from potential issuers and financial advisers already generating significant IPO proposals in a range of sectors. Whilst many of the challenges that shaped the economic landscape in 2019 are ongoing, it’s clear that businesses still have strategic objectives and compelling reasons to IPO in 2020,” she said.

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