Zurich – Switzerland has continued to experience favourable market conditions for corporate activity and capital market issuances. The first quarter has seen increased M&A activity and the successful conclusion of a number of high-profile ECM and DCM transactions Despite the potential risk of political uncertainty, we expect heightened activity levels to continue.
In line with global trends, Switzerland has continued to experience a very constructive market environment for corporate activity and capital market issuances. Q1 has seen a heightened level of M&A, as corporates increasingly turn to acquisitions to bolster their organic growth profile and take advantage of the current attractive funding conditions. Several high-profile ECM and DCM transactions have been successfully concluded in Q1, meeting very significant demand as investors continue to seek yield in the current prolonged negative interest rate environment. While political uncertainty remains a potential risk, we see little evidence of corporate and investor sentiment deteriorating in the near-term and expect the current heightened activity levels to continue in the coming quarters.
M&A – first quarter of 2017 got off to a very strong start
As for Q1 2016 with the announcement of ChemChina’s acquisition of Syngenta (USD 47bn), the first quarter of 2017 got off to a very strong start thanks to Johnson & Johnson’s proposed acquisition of Actelion (USD 31bn). The environment for M&A remains strong, with equity markets and investors supporting growth-related acquisitions and debt markets being wide open and offering attractive financing terms. The transactions announced to-date make sense from both a strategic and financial perspective, in some instances such as in the J&J/Actelion case with parties reverting to innovative transaction structures to bridge potential bid/ask gaps. Notwithstanding the forthcoming elections in Europe, we believe that we will see several quarters of continued healthy deal activity across a broad range of industries.
Equity Capital Market – Global IPO volumes rebounded strongly
Global IPO volumes rebounded strongly in the first quarter of 2017. IPO issuance totalled USD 27.6bn, up c. 130% compared to the first quarter of 2016. This strong market activity is testament to the robust market backdrop which has been marked by record-low equity market volatility levels and significant cash looking to be deployed into the market following any pullback. The CHF 1.9bn IPO of Galenica Santé which priced on April 6, demonstrates the depth of market liquidity and the willingness of investors to engage in large transactions. Even though geopolitical developments could result in increased market volatility during Q2, we do expect this to be outweighed by the positive economic recovery story that is playing out in Europe and the significant liquidity looking to be put to work. As a result, we expect Q2 to see an active primary market in Europe and Switzerland.
Debt Capital Market – Domestic segment recorded one of its strongest starts into the year
2017 saw a strong CHF primary market in Q1 with a combined new issue volume of CHF16.3bn. This represents a 10% increase compared to Q1 2016. The domestic segment has recorded one of its strongest starts to the year, accounting for 75% of Q1 2017 new issue volume. With 35 transactions year-to-date and a current market share of 25%, Credit Suisse continues to lead both the domestic and international market segments. In Q1, issuers followed a barbell strategy, focusing on shorter (1-3y) and longer (7-10y) maturities, leaving aside intermediate tenors. Furthermore, supply of lower IG and Crossover bonds as a percentage of the total market continued to grow making up 21% of total issuance. The share of corporates, financials and public sector bonds was in line with previous years.
With CHF 17.9bn of redemptions in Q1, net new issuance was only slightly negative at CHF -1.6bn. However, given the lower level of redemptions for Q2 and Q3 at CHF 11.4bn and CHF 14.0bn respectively, net new issuance could possibly enter into positive territory for 2017. Outlook in Q2 and Q3 for the international segment is increasingly positive in light of sharply falling cross currency swap costs into USD and EUR, which recently touched new 2-year lows. This development is particularly favourable for international issuers as it decreases relative costs of issuing in CHF rather than in their home currency. (Credit Suisse/mc/ps)
Credit Suisse AG
Credit Suisse AG is one of the world’s leading financial services providers and is part of the Credit Suisse group of companies (referred to here as ‹Credit Suisse›). As an integrated bank, Credit Suisse offers clients its combined expertise in the areas of private banking, investment banking and asset management. Credit Suisse provides advisory services, comprehensive solutions and innovative products to companies, institutional clients and high-net-worth private clients globally, as well as to retail clients in Switzerland. Credit Suisse is headquartered in Zurich and operates in over 50 countries worldwide. The group employs approximately 47’170 people. The registered shares (CSGN) of Credit Suisse’s parent company, Credit Suisse Group AG, are listed in Switzerland and, in the form of American Depositary Shares (CS), in New York. Further information about Credit Suisse can be found at www.credit-suisse.com
