LSEG's Trading Expert and Senior Manager of Trading Intelligence for Asia-Pacific, Elaine Tan, and IFR Asia Editor Daniel Stanton discussed trading trends in Asia.

In the first seven months of 2024, the announced M&A activity saw a revival, driven by large domestic deals in the United States, leading to a 16% increase in global M&A activity.

In contrast, the M&A market in the Asia-Pacific region failed to experience a broad recovery like other Western markets, with M&A activity dropping by 18%, reaching only $282 billion, marking the lowest total for the region in over a decade.

Amid double-digit growth in most global regions, China's announced M&A deals saw a year-on-year decline of 23%.

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This is also the main reason for the slower growth of the M&A market in the entire Asia-Pacific region.

Compared to the first seven months of 2023, in addition to the slowdown in China's M&A market, the same situation occurred in other parts of Asia-Pacific.

For instance, Australia's M&A activity declined by 22%, and Japan's M&A activity decreased by 10%.

The M&A activity in Southeast Asian countries dropped by 14%.

Despite this, there were several bright spots in the Asia-Pacific region (excluding Japan).

Mergers and acquisitions in India grew by 1.1%, and Japan is the fourth most active country in global cross-border transactions.

Japanese companies have been particularly active in Southeast Asia, with Singaporean target companies accounting for the majority of Japan's outward activities, followed by Thailand and Malaysia.

As some Southeast Asian countries push for infrastructure and communications construction, M&A activities in related industries are increasing.

For example, the second-largest deal in the Asia-Pacific region so far this year is the $6.5 billion acquisition of Thai mobile operator AIS.

At the same time, positive consumer sentiment has also driven an increase in retail-related M&A, including the region's largest announced deal—the $8.3 billion acquisition of Dalian Xinda Meng Commercial Management Co., Ltd. in China.

Although private equity firms have been behind some of the region's largest deals so far this year, bringing the total acquisition amount to $58 billion and increasing their share of the total M&A amount to 21%, this indicates that such investors will continue to maintain a strong investment momentum in the coming year.

However, the number of transactions supported by financial institutions has dropped by 45%, reaching the lowest level since 2020.

Chinese companies account for 42% of all acquisition activities in the Asia-Pacific region, with a total value of $24 billion.

The cautious attitude towards stocks in the Asia-Pacific region's stock market has also experienced a similar weak performance, with funds raised dropping by nearly a third compared to the first seven months of 2023.

At the beginning of this century, the Greater China region's stock issuance accounted for more than two-thirds of the Asia-Pacific region, and now it is close to one-third.

The heat of transactions in other places is also fading, such as the artificial intelligence-driven stock boom in Taiwan, China, which seems to be coming to an end.

Indonesia was once one of the most active IPO markets in the region, with a series of electric vehicle-related companies, but as reports of declining international electric vehicle orders emerge, market enthusiasm is also waning.

In contrast, India's stock market is promising, with many large technology companies shifting from the United States and Singapore to the Indian securities market for listing, in jargon, "reverse hype," because the low valuations in overseas markets lead to market convergence, making the domestic market relatively attractive.

Other promising developments include the liberalization of trading rules in South Korea and Japan, which seems to be releasing value and liquidity.

However, South Korea has also made block trades more complex through stricter transparency rules.

The bond market in the Asia-Pacific region's equity capital market has warmed up, but underwriting fees are still declining.

The G3 bond issuance in the Asia-Pacific region (excluding Japan) rebounded by 27% from the low point in 2023, reaching $49 billion.

Chinese issuers choose to finance domestically to take advantage of the low cost of RMB bonds.

In the first seven months of this year, the bond issuance in the Greater China region increased by 28%, reaching $49 billion, although this is only one-third of the issuance volume in the same period in 2019.

The high-yield bond issuance of G3 bonds in the Asia-Pacific region has exceeded $7 billion, surpassing the total issuance of $550 million for the whole year of 2023.

Elsewhere, the Australian dollar is increasingly favored by borrowers in the region, with Nestlé and Canadian provinces financing in Australian dollars, abandoning the pound and Canadian dollar.

As expected, in the first half of 2024, investment banking fees in the Asia-Pacific region dropped by nearly a quarter to just $9 billion, the lowest revenue level since 2017.

Fees related to bond issuance fell by 4% to $5.6 billion, while equity underwriting income plummeted by more than half to $1.6 billion.

M&A transaction advisory fees fell by a quarter, failing to reach the billion-dollar mark.

Meanwhile, China remains the largest investment banking market in the region, accounting for 60% of the market share and is also the second-largest market globally.