Forget about a summer slowdown
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Forget about a summer slowdown

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Capital markets bankers wondering about a possible ‘summer slowdown’ in transactions should put the thought firmly out of their heads. This year, the traditional break in August is likely to be replaced by an all-hands-on-deck approach to tackle the deal backlog.

The Covid-19 outbreak has thrown a wrench into Asia’s capital markets as it spread beyond China’s borders and turned from an epidemic into a pandemic. The effect was blatant on deals that usually take some time to get done, such as IPOs. The region’s pipeline quickly backed up as the weeks and months of preparations that go into deals were interrupted.

But since early April, the virus panic has loosened its grip slightly on Asian markets.

ECM and DCM deals have both started to materialise, with a handful of listings and a bunch of overnight block trades and share sales pulled off. Some investment grade bond issuers have also hit the market with hugely popular trades.

Typically, a few weeks into the second quarter would usually be a time of plenty of action for capital markets. But given that deals are only just picking out again, a reopening of the floodgates is imminent. Windows of more than just a few days are starting to open — a sign that the market is in for an uncharacteristically busy few months ahead.

Every year, before the periodic earnings blackout in late August, there is the so-called, ‘summer slowdown’. This is really nothing more than an implicit consensus between bankers and international investors that it’s time to take a few weeks off, and hop on a plane for a holiday on the beach or in the mountains of France.

But in a year as atypical as 2020 — where the coronavirus pandemic all but brought capital markets to a grinding halt in the first quarter — a busy summer for deals is only natural if markets stabilise.

An extra few weeks would be helpful to clear some of the glut in deals that is expected to swamp the capital markets in the fourth quarter. Issuers, bankers and investors should be prepared for a busy summer.

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