That there has been a shift away from the debt capital markets (DCM), was one of the takeaways from the “Healthcare and capital markets” session at this year’s HealthInvestor Asia Summit at the Marina Bay Sands in Singapore.

Last year was a big year for DCM, driven by an ability to take debt off the balance sheet, said Eugene Hong, senior vice-president, DBS Bank. In the past, he explained that cash rich healthcare companies didn’t need debt. Then perps became the idea of the day. “This year the bond appetite has tapered,” he said. There is a huge line up of IPOs coming up and the DCM market is quiet, but this is “a cyclical thing”.

Saurabh Gupta, managing director, head of consumer, retail & healthcare investment banking, at Maybank Kim Eng Securities, agreed that IPOs were the current flavour of the day. “It is fair to say that valuations have been fuelled by investor interest – institutional as well as retail,” he said. He pointed out the dynamic in Thailand that everyone with even a single hospital wants to IPO, but now across the region we are seeing medical devices, pharma companies as well as early stage drug delivery firms.

Tom Platts, partner, Stephenson Harwood (Singapore) Alliance, who chaired the panel, asked whether we should we look at private markets. “I see private capital more suited for greenfield investment,” said Fabio La Mola, managing director, L.E.K. Singapore. It was a point picked up by Hong who explained that both Raffles and IHH Healthcare were punished by the markets when they announced greenfield investment in China.  

As for M&As, “China is the big brother that is basically gobbling up everything”, said Hong. This is why valuations are being driven up while a further dynamic is the way that Chinese firms have felt the need to move away from targets in the US, thanks to political tensions between the two companies. “Now the focus on Australia,” he said.