Australian companies have raised the least amount in equity in six years this quarter as businesses avoid volatile markets shaken by war and rising interest rates.
The $54.3 million raised in IPOs so far in 2022 is down more than 90 per cent compared to last year, while the sum raised in follow-on offerings, which make up the vast bulk of equity capital raised, have more than halved.The decline in equity capital markets transactions comes at a fraught time in global financial markets as Russia's invasion of Ukraine, tightening monetary policy around the world and new worries including a potential slowdown in China rattle investors.
“That risk framework includes a combination of inflation, rising rates and, more recently, geopolitical uncertainty. All of that uncertainty has created a de-rating of a lot of risk assets globally and a lot more volatility.”P/ASX 200 has fallen more than 3 per cent this year and market volatility has surged through the choppy trading.P/ASX 200 VIX index, known by traders as the market’s “fear gauge”, sits at 15.8 points, higher than its long-term average and well above the 10.
“That means in terms of IPOs there is probably going to be a level of caution. IPOs have a longer execution timeline, which exposes deals to more market volatility, which is challenging in the current environment.”