IPOs ride to the rescue

It’s official, it’s been a great year on the stock exchange for new floats, or more correctly initial public offerings (IPOs), but not such a great year for the sharemarket overall.

The total capital raised via new ­listings on the ASX tripled in the 2014 financial year, from a total of 107 initial public offerings, 30 per cent more than in 2013. In value terms total equity raised was up 40 per cent.

The number put on capital raised via IPOs was $27.7 billion compared with just $9.9 billion in 2013.

It was a great year to raise equity on the market with listed entities also with getting in for their slice of the cake with $66 billion raised on the exchange – 42 per cent up on the $46.4 billion in the previous year.

Following another year of constraint and cost cutting most companies are now flush with cash, so expect even more merger and acquisition activity in 2014-15. There is already a lot of pressure building on companies from fund manager to put that cash to work or give it back to shareholders. The latter strategy obviously applauded by the yield chasers.

But overall the sharemarket has been treading water for the past six months after a surge in the first half of the last financial year. Overall the market grew 14 per cent which is a good result but worries remain that the longer it takes the market to convincingly break through the 5500 barrier the more risks loom on the downside. Subdued earnings growth, a downturn in commodity prices and an economy in transition – not helped by a tough Federal Budget – looks to have taken the wind out of the housing and retail market.

ASX trading volumes remained flat for the year. There was a 21 per cent fall in the number of trades in June compared with June 2013, which was a record month. The value of trades on the cash market fell 4 per cent to just over $1 trillion, although volume rose by 4 per cent to 881.9 million trades.

Looks like all those investors chasing yield in new floats, many of which are turnaround stocks being brought back to market by venture capitalists, may have saved the ASX’s bacon with new raisings – which accounts for about one-quarter of the exchange’s revenue – offsetting  steady to lower figures for cash, futures and derivatives trading.

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