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Volatility rocks AsiaPac H1 ECM; UBS tops fees
* ECM issuance plunges 30 pct to lowest since 2008
* Investors unlikely to return to markets soon on Europe concerns
* UBS leads on underwriting deals and estimated fees
* Chinese firms Guosen, Citic, GF make up 3 of top 5 fee earners
By Elzio Barreto
HONG KONG, June 29 (Reuters) - Asia-Pacific stock sales dropped to a four-year low in the first half of 2012 as lingering concerns about Europe's sovereign debt crisis and a slowdown in China rocked investors' confidence in new listings in the region, Thomson Reuters data shows.
Investment banks hoping for blockbuster IPOs in the second quarter were left high and dry. London jeweler Graff Diamonds' $1 billion Hong Kong offer and motor racing company Formula One's $3 billion IPO Singapore were among the high-profile offerings that became victims of the choppy markets.
Despite a slow start, the deal pipeline remains healthy. Big IPOs waiting in the wings include the $2 billion offer from Malaysia's IHH Healthcare and up to $6 billion IPO of Chinese insurer PICC Group. A slew of Chinese city commercial banks are also hoping to tap the Hong Kong market.
"As people look to get back into the market, it's like recovering after a heart attack -- you hesitate," Philippe Uzan, chief investment officer at Edmond de Rothschild Asset Management, said on the sidelines of an investment forum in Hong Kong. "Things are very volatile and people are changing their minds very quickly."
After rallying 16 percent through the end of February, the MSCI index for Asia ex-Japan tumbled nearly 13 percent from that point to the end of June, hit by the euro zone debt crisis. But lower valuations have failed to lure investors.
Equity issuance in the region excluding Japan tumbled 30.4 percent to $77.9 billion in the first half from a year earlier, preliminary Thomson Reuters data showed. That was the lowest since the $73.1 billion recorded in the first half of 2008.
IPOs, which earn most fees, were hit hard, falling 62 percent to $19.2 billion, the data showed.
UBS AG reclaimed the top underwriter position, after losing the crown to rival Goldman Sachs in 2011 for the first time in seven years. Citigroup took third spot, leaping from 14th rank a year earlier.
UBS also raked in more underwriting fees than any other bank in the region, according to Thomson Reuters/Freeman Consulting Co estimates. Chinese firms including Guosen Securities and Citic Securities, which focus on the domestic market, took three of the top five spots in terms of fees.
IPOs, which normally make up about half the ECM volume, accounted for just 25 percent of issuance in the first half. Follow-on offerings cornered about two-thirds of the volume, underscoring investors' preference for listed company stock offered via block sale.
The blocks of stock are normally sold at a discount to market prices to lure institutional investors, including hedge funds and private equity companies.
"When volatility is high and peaking, it makes pricing IPOs much, much more challenging," said James Fleming, co-head of Asia Pacific ECM at Bank of America Merrill Lynch. "At the same time, investors who have cash to put to work actually quite like placements coming at a discount."
SOUTHEAST ASIA BOOMS
Felda Global Ventures' $3.1 billion IPO in Malaysia put Kuala Lumpur on par with Shenzhen as the main IPO destination in Asia Pacific, leaving behind Hong Kong which grossed the highest IPO proceeds in the world in 2009 and 2010.
Other large deals in the Philippines and Thailand offered a ray of hope to deal makers as other Asian countries crumbled.
A survey of fund managers handling $25.2 trillion in assets showed that 78 percent of respondents expect "prolonged turbulence" in the markets, which is bad news for equity offerings. But some investors are willing to test the waters, depending on the outcome of Europe's debt crisis.
"These have been very difficult markets to have successful IPOs," said Andrea Muller, CEO of Principal Global Investors Asia, which sponsored the survey. "Investors have been very cautious." (Additional reporting by Vikram Subhedar; Editing by Denny Thomas and John Mair)
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