"The markets have been weak," said John Ditieri, who helps manage about $13.5 billion in developing-nation stocks at Arlington, Virginia-based Emerging Markets Management. "IPOs in the next few months will need to be priced attractively to get investors in."

Brazilian IPOs
Brazilian companies are still lining up deals. Brazil Pharma SA, a Sao Paulo-based pharmaceuticals retailer, and Qualicorp SA, the health-insurance broker controlled by Carlyle Group, are seeking to raise a combined 2.4 billion reais ($1.5 billion) this month. Perenco Petroleo & Gas do Brasil Participacoes SA, a unit of France's Perenco, plans to raise as much as 1.1 billion reais next week.

Brazil Pharma is selling as many as 27 million shares, including possible supplementary offerings, for 17.25 reais each to raise as much as 465.8 million reais, the company said in a regulatory filing yesterday.

OAO PhosAgro, Europe's largest maker of phosphate fertilizers, expects to raise as much as $1 billion, Chief Executive Officer Maxim Volkov said June 17. The Moscow-based company's offer will be priced July 15, according to a term sheet obtained by Bloomberg News.

Canceled Sales
At least five Russian and four Brazilian companies have scrapped offerings while Rio de Janeiro-based oil and gas producer QGEP Participacoes SA and Moscow-based HMS Hydraulic Machines & Systems Group Plc sold below their price ranges.

Russia's canceled sales have reached $4 billion while companies worldwide raised at least $112 billion, up from $98.4 billion in the year-earlier period, data compiled by Bloomberg show. IPOs totaled $121.3 billion in all of 2009.

While gains in commodities have been a boon in the past for Brazil and Russia by swelling export revenue, they have proved a bust for equity investors this year. As Standard & Poor's GSCI index of 24 commodities advanced 32 percent in the past year, developing-nation policy makers have raised borrowing costs to slow accelerating inflation and contain credit growth.

Brazil's central bank increased the benchmark interest rate seven times to 12.25 percent from a record low of 8.75 percent in April 2010. Bank Rossii has boosted the fixed overnight deposit rate four times since December to 3.5 percent. India has raised borrowing costs 10 times since March 2010 to 7.50 percent. The People's Bank of China has increased its deposit rate four times since September to 3.25 percent.

'Biggest Headwind'
Benchmark equity indexes slumped 11 percent in Brazil this year, 2.8 percent in Russia, 14 percent in India and 5.7 percent in China. The MSCI Emerging Markets Index of 21 countries is down 3 percent while MSCI's World Index of developed markets has climbed 1.8 percent.

"Inflation has probably been the biggest headwind," said Tim Hall, who helps oversee about $800 million as managing director at Deltec Asset Management in New York. "Concern over the reaction by central banks to that inflation, whether they take a step too far and tighten too much or whether they're behind the curve and don't tighten enough."

The biggest exception to the developing-nation IPO drought has been Internet companies.

Renren's Swoon
Yandex NV, owner of Russia's most popular Internet search engine, jumped 55 percent on its May 24 trading debut in New York after selling shares above the projected price range. Qihoo 360 Technology Co., the Beijing-based provider of computer anti- virus products and Web browsers, has advanced 25 percent in New York since raising $201.9 million in a March IPO that priced above its range.

After climbing 29 percent in its May 5 debut in New York, Renren Inc., China's biggest social-networking website by page views, is down 48 percent from its IPO. Two other Chinese Internet companies that sold equity in New York last month, NetQin Mobile Inc. and Jiayuan.com International Ltd., are also trading below their offer prices.

Speculation that developing nations would post stronger economic growth than U.S. and Europe had prompted the projections for a deluge of IPOs, said Ditieri at Emerging Markets Management.

Indian Sales
Elena Khisamova, the head of equity markets at VTB Capital, Russia's largest stock underwriter, forecast in November $20 billion in IPOs this year, saying any Russian listing of "significant" size would succeed. Khisamova said in a June 21 telephone interview that she expects $20 billion in combined follow-on and initial offerings this year, of which $9.2 billion have already taken place.

The Indian government raised 221.4 billion rupees ($4.9 billion) from share sales of state companies in the fiscal year ended March 31, less than its 400 billion-rupee goal. It set the same target for the current fiscal year. Seventeen of the 20 largest IPOs in India since last year trade below their offer price, data compiled by Bloomberg show.

Edemir Pinto, the head of the Sao Paulo exchange, said in a January interview that IPOs were likely to beat 2007's record of 55.6 billion reais. He abandoned that estimate after at least four companies canceled sales this year, according to an official at the exchange who asked not to be named in accordance with internal policy. Three of this year's seven IPOs priced below range. Two sold at the bottom of the range.

Delayed IPO
QGEP, the energy exploration and production unit of Brazilian holding company Queiroz Galvao SA, sold shares at 19 reais apiece in February after projecting a range of 23 reais to 29 reais. QGEP is down 13 percent since the offering.

OAO Koks, Russia's largest pig-iron exporter, is turning to the debt market after postponing an IPO this year. The company issued $350 million of bonds overseas and 5 billion rubles ($179 million) of debt this month.

Pump manufacturer and service provider HMS Hydraulic Machines & Systems sold global depositary receipts in February at $8.25 apiece, missing its target range of $9.25 to $12 each. The GDRs have slipped 14 percent since then.

"Some investors are not willing to participate in emerging market IPOs as recent experiences have not been overwhelmingly positive," said Ed Kuczma, who helps manage $30 billion at Van Eck Associates in New York. "Nothing kills the prospects for new paper than a dead deal."

Bloomberg News

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