After some 21 months of frenetic capital raising activity, the first half of 2022 has seen global equity and debt capital markets finally return to (at best) more normal levels of activity. A 14% fall in debt issuance to $4.8trn masks much deeper falls in higher yield instruments, while equity issuance has been slashed across all regions, with the IPO window slamming shut.
- US equity markets are leading the retreat with an 85% decline in issuance
- There is flight-to-quality as high-yield drops by 78%
- The overall debt issuance, at $4.8trn, is being supported by investment-grade borrowers
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The first six months of 2022 have seen significant reductions in activity across international capital markets, as a global health scare emergency gives way to concerns around geo-politics and jitters around mounting macro-economic pressures.
The biggest falls have been in equity markets, where issuance has slumped 67% year-on-year to raise just $237bn, the slowest opening half since 2005. Meanwhile, the number of issues reached just 2,000, a fall of 48% and a 10-year low. It was a similar story for secondary offerings, down 63% by value and 48% by number of follow-ons. Convertible offerings have become particularly unloved, suffering a 78% drop in proceeds.
The US was particularly hard-hit, with an 85% fall in equity issuance to take just 14% of the global market. By contrast, Chinese issuance took its largest percentage share activity in any first half period, despite suffering a 55% decline to $83bn. Elsewhere, double-digit declines were the norm, with EMEA issuance down 68% to a 26-year low, a low point surpassed only by Japan, which saw just $4.1bn raised, the weakest half-year total since the start of its ‘lost decade’ in 1992.
Meanwhile, the US IPO window has all but closed, with a 95% drop in listings compared to the first half of 2021, to raise just $4.3bn, as investor’s sentiment sours on tech stocks in particular. Globally, there was a 67% global decline in IPO proceeds, bringing the market back down to roughly pre-pandemic levels.
In terms of global equity underwriting activity, Goldman Sachs retained its top position, while CITIC leapt to second place, pushing Morgan Stanley to number three.
Are debt markets looking at flight-to-quality as they retreat?
The global pull-back in debt issuance has been similarly dramatic, although less so the further up the capital structure you go.
Overall global debt issuance was down 14% to $4.8 trillion, broadly back to pre-pandemic levels, while the number of issues was down a relatively modest 7% compared with the first half of 2021. Investment grade corporate debt suffered its slowest first half since 2019, and the direction of travel has been negative through the year so far – Q2 issuance was down 29% on the first three months of 2022. Even so, some $2.3 trillion was raised by these highly rated issuers, a decent showing for any year prior to 2020.
The picture is bleaker among high-yield instruments, where issuance dropped 78% on the year, the slowest first half since 2009.
Meanwhile, emerging markets were down 48% compared with the same period in 2021, raising just $120bn in the first half of 2022. Corporate debt issuers from India, Thailand, Brazil and Malaysia accounted for almost two-thirds of all emerging markets issuance in H1.
International bond offerings fell 28% on the year to raise just $2.2 trillion, but Asia local currency bond offerings leapt 23% to raise $1.9 trillion, the highest level since records began in 1980 and the solitary bright spot in an otherwise bearish global market.
JP Morgan retained top spot as the most active underwriter of debt capital globally during the first half of 2022, while BofA Securities took second place, pushing Citi into third.
