2010-06-24 08:57

A customer pays for gas at a Petroleo Brasileiro SA gas station in Sao Paulo, Brazil. Petrobras may raise as much as $40 billion in the world's biggest share sale ever, according to Brazil's state development bank.  [Agencies]

Offerings from emerging markets surpass those of developed nations

NEW YORK - Agricultural Bank of China Ltd and Petroleo Brasileiro SA may hit the market with $50 billion of shares by the end of September after state-backed sales pushed initial public offerings (IPO) in emerging markets above developed nations for a record fifth straight quarter.

While at least 47 initial sales worldwide were shelved since March, China's State-owned Agricultural Bank is forging ahead with a July IPO of as much as $28 billion that would be the world's biggest ever. Petrobras, Brazil's state-controlled oil company, plans to raise $25 billion in September, the western hemisphere's largest sale in at least a decade, after delaying the offering by two months on Tuesday.

IPOs in developing countries raised $29.3 billion this quarter, almost three times the amount in industrialized nations, as the European debt crisis sent stock indexes from Tokyo to Paris and New York to their lowest levels of 2010. While bears say the new sales will inundate emerging countries and choke off capital to private companies, bulls say economic growth that's double developed nations will underpin demand.

"They're probably pushing the outside of the envelope," said Jeff Urbina, who helps oversee $44 billion at Chicago-based William Blair & Co. "People are still reasonably comfortable with the fiscal situation and growth prospects of emerging markets. I don't know if they'll necessarily crowd out other IPOs, but they're certainly going to soak up capital."

Greece, Spain

Stocks declined worldwide this quarter on concern the global economic recovery will be curbed as countries from Greece to Portugal and Spain struggle to fund their liabilities.

While the MSCI Emerging Markets Index sank 18 percent this quarter, government-owned companies from Poland to India pushed ahead with share sales.

IPOs from nations in MSCI's emerging-markets gauge exceeded those by companies in industrialized countries by $18.1 billion, extending a five-quarter streak that is the longest since at least 1999, according to data compiled by Bloomberg. Deals in emerging markets rose 9.4 percent from the prior quarter, while developed-market offerings fell 54 percent to $11.2 billion.

"The investor appetite is just not there right now" for initial sales in industrialized nations, said Robert Froehlich, senior managing director at Connecticut-based Hartford Financial Services Group Inc, which oversees about $396 billion. "The US is getting painted with the European brush, and that's laying into the sweet spot for emerging-market IPOs."

Polish insurer

PZU SA, Poland's biggest insurer, raised 8.1 billion zloty ($2.7 billion) in April in Europe's largest initial offering since 2007. The government and Zeist, Netherlands-based Eureko BV sold a 30 percent stake in the Warsaw-based company at the high end of its estimated price range.

The IPO, a record for the 19-year-old Warsaw Stock Exchange, was part of Poland's state asset sales aimed at raising $10 billion to help finance a widening budget deficit.

SJVN Ltd, the operator of India's largest hydropower plant, sold 10.79 billion rupees ($240 million) of shares in an initial offering at the top of its forecast range in May. The state-owned company, based in Shimla, priced 415 million shares at 26 rupees each.

State sales "will have more support from domestic institutions for strategic reasons, like in the case of PZU", said Jeff Chowdhry, London-based head of emerging-market equities at F&C Asset Management, which oversees more than $148 billion.

"It will also be true for Agricultural Bank."

Bloomberg News