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BRICS' companies are freezing IPOs


Companies in emerging markets are freezing their plans to sell shares in stock exchanges. Still pretty dependent on the foreign investors, organizations from BRICS–Brazil, Russia, India, China and South Africa–are canceling their initial public offerings. 

While developed countries around the world suffer to put their economies on growth track again and emerging markets try to reduce their slowdown, the stock markets are struggling to provide gains to investors. As a result, companies have been decided to wait for a better opportunity to do share sales.

According to Bloomberg, Brazilian companies are canceling initial public offerings at the second-highest rate among the biggest emerging markets. The slowdown in Brazilian economic growth rates makes the country’s benchmark stock index (Ibovespa) the worst performer among BRICS in 2012 until now.

Three IPOs in Brazil were cancelled this year, while seven were announced – which means more than 42% of cancellations. India, for its part, cancelled less than a third of offerings this year while China had zero withdrawals. Russia is the worst in ranking: one initial share sale was done as well as one cancellation.

Louis Dreyfus Holding BV’s Biosev, a sugar-processing unit, became the latest company to withdraw its initial share sale in the Brazilian market. The organization canceled a 1.14 billion-real offering last week due to the “market uncertainties.”

The Bovespa stock index has dropped more than 23% this year’s since its peak on March 13 as Europe’s debt crisis worsened, prices for commodity exports fell and analysts cut their economic growth forecasts to the weakest since 2009, says Bloomberg.

Two of the three offerings completed in Brazil this year – from car-rental Cia. de Locação das Americas and furniture-maker Unicasa Indústria de Móveis – were priced below the lower end of the companies’ targets. The biggest IPO in Brazil this year was completed by Grupo BTG Pactual, the investment bank led by billionaire Andre Esteves. The bank had raised 3.23 billion reais in April. Brazilian companies raised a combined 3.88 billion reais ($1.89 billion) in 2012 through IPOs, down 40% the same period a year ago.

Investors have been questioning if Brazil is facing just in a cyclical slowdown or the situation is more serious. According to the growth forecasts elaborated by International Monetary Fund (IMF) for BRICS in 2012, Brazilian economy might growth just 2.5%, while China is struggling to grow as fast as 8%. 

Is important to note that investments in Brazil aren’t as attractive as China because the currency is overvalued and there’s too much government intervention in the economy, said Mark Mobius, the executive chairman of Templeton Emerging Markets Group, in a Bloomberg Radio interview on July 18.

In China, 261 companies have announced plans to sell shares for the first time this year. In India, six IPOs were withdrawn, while 21 have been announced. In Moscow, Interfax Russia announced plans for an IPO in February, while engineering company EMAlliance canceled plans for a sale.


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