In the nascent months of 2025, the capital markets in the Asia-Pacific (APAC) region are grappling with a complex interplay of external pressures, primarily stemming from United States trade and economic policies. This development has led companies to reassess their capital expenditure funding strategies, a reflection of shifting investor sentiments regarding corporate earnings and broader market conditions. While issuance levels have been dampened in the short term, experts predict a gradual normalization in the coming months.
Aaron Oh, a financial analyst at UBS, indicates optimism for the future of equity capital markets (ECM) in the region. He anticipates that once the macroeconomic conditions stabilize, issuance volumes will return to robust levels across key markets, including China, Southeast Asia, India, Japan, and Australia. This forecast is underpinned by a noticeable uptick in IPO activity in China early this year, surpassing previous levels from the same period in 2024. Ivy Hu from UBS elaborates on this remarkable trend, noting that not only have IPOs performed well post-market, but mega transactions—some reaching billions of dollars—have also made a significant comeback. The diversification in types of transactions is noteworthy, expanding from traditional convertible securities to include a broader array of placements and IPOs.
Particularly striking is the shift in sector activity. In 2024, technology, media, and telecom (TMT) companies were predominant players within the Chinese market. However, this year has seen the emergence of new drivers, particularly in the fields of artificial intelligence (AI) and consumer sentiment. As Hu points out, there is a buoyant atmosphere in the primary market generated by these sectors, highlighting a transformation that reflects evolving investor interests.
The appetite for investment in AI, bolstering various elements of infrastructure, including data centers, remains a strong theme among investors in the region. Oh asserts that this enthusiasm for AI will likely influence a substantial volume of equity deals across APAC, particularly as companies require increased capital for technological developments related to AI. He reflects, “As companies need more capex for data centres, we think there’s going to be more activity and interest around the whole AI value chain.”
In a broader context, the stabilization expected in the second half of 2025 may provide abundant opportunities for companies with robust fundamentals and compelling narratives to attract investor funding for a variety of transactions, spanning IPOs, accelerated block trades, follow-on offerings, and convertible securities. As Oh emphasizes, the belief is that market activity will be bolstered across all product types.
Simultaneously, a shift in corporate strategy is anticipated. Companies are expected to concentrate on core business activities while divesting non-essential assets through mechanisms like block trades, exchangeable bonds, and carve-out IPOs of subsidiaries. This focus on core competencies could streamline operational efficiencies amid a fluctuating economic environment.
As uncertainty persists within the global economic landscape, private markets are gaining traction as a credible alternative for both public and private entities seeking capital. Oh predicts an increasing relevance of private markets amid market volatility, suggesting a trend where companies will opt for a dual-track process. This approach allows companies to evaluate whether they would be better suited for a public market listing or could extract greater value through mergers and acquisitions.
In this dynamic environment, structured financial products are becoming essential tools for managing capital against current market challenges. Innovations designed to provide downside protection and yield enhancement might include selling positions at a premium or locking in downside safeguards, which may alleviate some of the risks associated with heightened market volatility.
The timing of market entries has also grown more critical for issuers, necessitating agility in response to market conditions. Hu suggests that an increasing number of Asia-listed companies are leveraging the Hong Kong market as a gateway for attracting international funds and investors. This strategic pivot underscores the importance of timing and tactics in capital raising.
Moreover, Oh adds that product innovation will remain integral to an issuer’s strategy. As the financial landscape evolves, the ability to assess the most effective timing and methods for execution will be paramount.
In conclusion, while the initial months of 2025 present significant hurdles for APAC capital markets, the underlying fundamentals suggest a promising pathway forward. Companies and investors alike are tasked with navigating these challenges, balancing caution against potential opportunities for growth in an ever-changing financial environment. As market conditions stabilize and investor appetites adjust, the foundation is likely being laid for a vibrantly active period in the APAC equity landscape. The evolution of investment sectors, particularly in AI, combined with a resurgence in IPO activities, could define the trajectory of capital markets in the Asia-Pacific in the years to come.