Global mergers and acquisitions by fast-growing companies in India, China and Russia will fuel another bumper year for capital markets in Europe, bankers say, as they seek finance for their growth plans. Former Soviet republics such as Uzbekistan, Tajikistan and Turkmenistan are also hotspots for equity and debt capital market bankers as they seek the newest emerging markets.
Russia's $ 11 billion Rosneft <ROSN.RTS> initial public offering was one of the biggest new issues of 2006 as European IPOs reached an all-time high of $98 billion, according to preliminary figures from finance industry data provider Thomson Financial published on Wednesday.
Bankers expect follow-on business from expanding, listed companies from these regions.
"If you take India, its aspirations are getting global," said Viswas Raghavan, JP Morgan's <JPM.N> head of equity and debt capital markets outside the Americas.
"As its ambitions are realised they will have to be financed in the capital markets," he added, highlighting the links between India and former colonial ruler Britain.
Tata Steel's <TISC.BO> daring move to buy Anglo-Dutch steelmaker Corus <CS.L> highlights the growing ambition of cash-rich Indian firms starting to look beyond their home turf.
Including the proposed Corus deal, Indian companies have announced overseas acquisitions worth $19.5 billion this calendar year to the end of October, up from $4.5 billion in 2005, data from research firm Dealogic showed.
China produced the two biggest global IPOs in 2006 - ICBC <1398.HK>, which raised $22 billion and Bank of China <3988.HK>, which raised $11 billion.
Follow-on business from these regions will play a growing part in Europe's capital markets.
"China, India activity will create global giants, but ones not headquartered in the U.S. or Europe ... the landscape is shifting," said JP Morgan's Raghavan.
JP Morgan was ranked second in the European equity capital market rankings for 2006, up from fifth in 2005.
Eastern Europe will continue to play a large role, but after a slew of oil company listings from the likes of Russia and Kazakhstan, metals and mining companies are likely to dominate the IPO landscape.
"The other area you are likely see lots of activity is the bank space," said Jeroen Berns, head of Europe at ABN AMRO <AAH.AS> Rothschild. "Further down you may also see more retailers tapping the market."
Berns said the IPO market was likely to remain buoyant as private equity houses seek to exit their investment through flotations rather than by sale to corporate or financial buyers.
"A lot of deals have gone down the trade sale route. If the M&A market gets a little bit less active then they may have to rely more on the public market to exit," said Berns.
"A huge volume of publicly listed stock has been taken off the market for cash so on balance there remains very strong appetite for new equity."
Convertibles also picked up, with 48 in 2006 against 34 in 2005.
But bankers said the instrument was unlikely to reach the same peak seen in 2002 and 2003, when equity valuations and interest rates were low, but volatility was high.