MinterEllison’s new report, Directions in Capital Markets 2018, outlined five sectors it predicts will remain dominant in Australia for the coming year, with healthcare, resources, agribusiness, technology and financial services all making the list.
“Given the continuing trend of the Australian economy being bifurcated along broad lines such as health, commercial and financial services (in the services economy) and the continuing major pipeline of players in energy and resources and agribusiness (in the commodities economy),” the report said, it expects to see “most or all of these areas being dominant in both the IPO and secondary (entitlement/placement) markets”.
It noted the trend as having “played out across Australian equity markets during the year” and expects this to continue “for the foreseeable future”.
The health sector is predicted as “continuing to evolve and diversify” by capturing transactions from large physical players such as hospital and diagnostic companies through to middle market services.
It also suggested that transactions will continue in “a relatively steady stream of drug discovery and medical device IPOs”.
For commercial and financial services, a “pipeline of capital market transactions at IPO and secondary levels” are expected, “whether as part of a dual track strategy or straight to IPO transactions”.
Energy and resources “cannot be discounted as an underlying driver of capital markets”, according to the report, which has based this forecast on secondary market activity from 2018.
The report attributes the number of private and family owned businesses continuing to consider capital market transactions to “the intergenerational ownership and wealth transfer that Australia is presently undergoing”.
Such businesses are using capital market transactions to grow or diversify their businesses, “or providing a future pathway to sell down and/or exit”, the report explained.
Generally, the report stated that despite recent volatility, it expects “that elevated equity market valuations will remain for FY19”.
This is as a “continuing small but steady stream of foreign-listed companies” seek to raise capital in Australian markets, with the report noting that offshore entrants “who can demonstrate the right business model and approach to regulatory issues are likely to find opportunities”.