HONG KONG/LONDON/NEW YORK – After a year marked by strong demand for selected bonds, investor fashion looks set to switch back to equities next year on the back of more positive macro-economic prospects.
Some investment bankers will welcome the change.
Companies and their advisors have had to take advantage of short windows of opportunity to get share sales done in the past year, as markets were buffeted by the euro zone debt crisis, lackluster global growth, the U.S. presidential election and lately worries over the "fiscal cliff".
Follow-on share sales helped offset a 28 percent drop in new listings, with global equity capital markets (ECM) volumes totaling $625 billion so far this year, Thomson Reuters data showed on Friday, a 1 percent rise on 2011.
"In the last year there has been a real aversion to risk. I think you are going to see that revert to a more constructive ... demand for risk," said Joe Reece, global head of ECM at Credit Suisse .
"We are going to see an increase in demand from investors for equity which will significantly benefit issuers and enable the calendar (of deals) to be expanded," Reece said.
Some investors have already begun increasing their exposure to shares as hopes rise that greater economic stability will return in 2013.
Follow-on activity, which includes accelerated block sales of existing shares, was up 15 percent on 2011, accounting for 71 percent of ECM volumes this year.
"In the uncertain world that we live in, if you can do an accelerated deal, you do," said Oliver Holbourn, head of UK, Ireland and South Africa ECM at Bank of America Merrill Lynch .
The financial sector dominated activity in 2012, making up around 30 percent of volumes, boosted by the U.S. government's five sell-downs of bailed out insurer American International Group - which generated total proceeds of $45.8 billion.
Other large deals included AIG exiting Asian insurer AIA Group <1299.HK> and Italian bank UniCredit's capital hike.
Goldman Sachs retained its position at the top of the global ECM investment banking league table, the Thomson Reuters data showed, after being involved in many of the year's biggest offerings including the $16 billion float of Facebook .
Bolstered by the Facebook offering, the U.S. saw its strongest year for IPOs since 2007, although the bulk of activity was made up of smaller, high-growth deals clustered around the technology and retail sectors.
U.S. bankers anticipate a quiet start to 2013, but said a few successful deals could pave the way for a slew of offerings from large private equity backed-companies that filed with the regulator this year, including Bright Horizons Family Solutions Inc and satellite services company Intelsat Global Holdings SA.
Other high profile IPOs coming up include beauty products maker Coty US Inc and Pfizer Inc's animal health unit.
Interest from foreign firms with a connection to the U.S. in going public there is likely to continue, as they look to take advantage of more resilient markets, said Matt Sperling, Rothschild's head of equity advisory for North America.
This year several European companies, including vacuum technology firm Edwards , listed in the United States. The Jobs Act, which made it easier for smaller companies to raise capital, could provide a further incentive, advisors said.
But Europe's IPO market, which saw a 61 percent slump in volumes in 2012, has begun to rebound since September as rallying stocks persuaded sellers and buyers to test the water.
While the recovery remains fragile, the lack of activity has left a backlog of deals which could come to market next year, bankers said.
Successful stock market debuts in Europe tended to be of firms offering a strong dividend yield, such as Telefonica Deutschland
"If investors can get a clear sense there is strength in a company's ability to pay dividends and generate an attractive total shareholder return, there is a real audience," Darrell Uden, UBS co-head of EMEA ECM, said, adding while this was set to stay, investors were also keen on a return of growth stories.
Asia Pacific saw a drop in new listings, with volumes falling 51 percent to $39.6 billion after investors burned by underperforming IPOs last year steered clear of the market.
Southeast Asian markets including Malaysia, Thailand and the Philippines drove IPO activity in the region, but Hong Kong and mainland China are expected to see a rebound in 2013.
"There just has to be a more reasonable approach to pricing deals," said Jonathan Penkin, head of ECM for Asia ex-Japan at Goldman Sachs in Hong Kong, where for years IPOs of Chinese state-owned firms were the main fee earner for global banks.
Conglomerate CITIC Group, Postal Bank of China and China Minmetals Corporation Group are among the remaining large state-owned enterprises still expected to list, bankers said.
Sectors likely to see increased activity in 2013 include those related to Chinese domestic consumption, business-to- consumer Internet companies and electronic gaming, said Ringo Choi, Asia Pacific IPO leader at Ernst & Young in Hong Kong.
Analysts and bankers saw Chinese e-commerce company Alibaba Group as a potential 2013 blockbuster IPO. Financial services firms could also feature after several, including Bank of Shanghai, delayed sales due to difficult markets in 2012.
Yet carefully navigating choppy markets will remain key.
"Our advice to issuers is to be ready, be nimble, and access windows of opportunities when they arrive," said Phil Drury, co-head of ECM for the Americas at Citigroup .
(Editing by David Holmes)