Malaysia to participate in the wave of public listings in Southeast Asia

PETALING JAYA: The strong growth potential of Southeast Asia continues to position regional markets, including Malaysia, as a favorite for investors in the second half of 2023 (2H23), based on the number of initial public offerings (IPOs) registered in 1H23, according to Deloitte Malaysia.

The financial advisory and auditing firm said foreign direct investment (FDI) has risen due to the reopening of the region, the restoration of the tourism industry and booming domestic demand.

These factors have provided a springboard for economic growth in the region despite global economic uncertainties, it added.

Bursa Malaysia has continued its IPO momentum having completed 16 listings in the first half of 2023, roughly the same number of listings executed in the same period last year.

“Although the proceeds raised by these IPOs in 2023 fell 22% year-on-year (yoy) to RM1.6bn compared to the RM2.1bn raised last year, the IPO’s market capitalization rose 42% to RM9. 600 million. Deloitte Malaysia said in its latest research review on the Southeast Asia mid-year IPO snapshot.

Deloitte Malaysia’s leading disruptive events advisor, Wong Kar Choon, revealed that the initial public offering of real estate developer Radium Development Bhd and electronics maker Cape EMS Bhd in the first half of 2023 were among the top 10 listed in the Southeast Asia, with a combined total of RM667.7 million raised.

Compared to the corresponding period of 2022, he said the local stock exchange also oversaw 16 listings, which raised around RM2.1bn, mainly due to the presence of a strong heavyweight dairy group. farm fresh bhd.

It is also interesting to note that Bursa Malaysia had set a target of 39 IPOs with a market capitalization of RM10bil this year.

While it appears that the exchange has lagged slightly behind in terms of the number of new listings, Deloitte Malaysia said that Bursa Malaysia is targeting seven main market IPOs in the second half of 2023, with another 14 IPOs for the ACE market, in addition to coming fractionally close to achieving the expected market capitalization before July.

Deloitte’s Wong believes this data shows continued investor confidence in the local capital market, with a proven track record of trading, especially evidenced by most of the 16 IPOs this year achieving high oversubscription rates, supported by the support from institutional and retail investors.

“The Prime Minister’s recent announcement on the competitiveness of the capital market has delivered substantial positive messages for capital market stakeholders, including the reduction of stamp duty rates for trading in shares listed in Bursa Malaysia and a policy review to attract and broaden the pool of investors,” Wong said.

While there can always be negative sentiment in the market, he said that IPOs in Malaysia have shown that the right companies can continue to raise funds and attract investors, especially with the introduction of the Madani Economy framework by the unity government.

As such, Wong believes that good tech-enabled companies will continue to get the funding they need for expansion, whether through an initial public offering or through private equity financing.

“South East Asia’s positive growth outlook is making the region a favorite for investors.

“There continues to be an influx of foreign direct investment due to the reopening of the region, the restoration of the tourism industry and a booming domestic demand.

“Together, these factors have contributed to the region’s economic growth despite global uncertainties,” Wong noted.

The growth factor also resonates with Rakuten Trade’s head of equity sales, Vincent Lau, who believes the IPO’s vigor could continue for the remainder of 2023, assuming the results of tomorrow’s six state elections maintain status. quo.

Lau also believes that if the political situation in Malaysia remains stable, equity markets should recover, especially with his expectation that the US Federal Reserve will maintain its funds rate after the recent 25 basis point hike in July. .

“There are several countries with huge growth potential in Southeast Asia, such as Vietnam, Thailand, Indonesia, as well as Malaysia and of course China, because most of these nations are still seen as emerging markets by investors,” he said. Lau to StarBiz.

Meanwhile, an analyst at a bank-backed brokerage opined that the performance of a newly listed entity largely depends on “what market the listing takes place in and what sector the company is in.”

“A listing on the ACE Market is a different ball game compared to a listing on the Bursa Malaysia Main Market.

“Another factor is whether institutional investors can invest in a certain company that has recently been listed because the placements for these two markets attract different participants,” he said.

The analyst told StarBiz that investors might be expecting a couple of major market listings in the second half of 2023 that he believes could influence the direction of the local stock market to some extent.

In addition to the nature of the publicly traded company’s business, he said IPO valuations, products and services offered, as well as the fundamentals of a new company on the stock exchange, would also be critical in attracting investors.

In some ways, this echoes Wong’s perspective that tech companies are expected to do well.

In a separate note, the analyst added: “We believe that in terms of number of IPOs, going forward, Bursa Malaysia should be quite accurate in its estimate as many of these companies have started their listing processes which were interrupted by blockades in the last three years.

“So the pipeline should continue to come in 2H23.”

Meanwhile, Deloitte’s Wong said the Southeast Asian capital market as a whole achieved 85 IPOs in 1H23, raising US$3.3bn (RM15k) in gains, while the market capitalization of IPOs it stood at US$20.1 billion (RM 138 thousand).

This compares to 73 IPOs, US$3.1bn (RM14k) of proceeds raised and US$35.4bn (RM162k) of IPO market capitalization achieved in 1H22.

He also said that Indonesia had continued its hot streak since 2022, with its IPO market performing the best to date in the region, raising around US$2.3bn (RM10.5bn) out of a total of 44 IPOs.

It is followed by Thailand with US$528 million (RM2.4 thousand), Malaysia US$363 thousand (RM1.6 thousand), the Philippines US$66 thousand (RM301 thousand) and Singapore US$33 thousand (RM151 thousand).

“As the largest economy in Southeast Asia and a nation with one of the largest populations in the world, Indonesia continues to see massive and increasingly profitable IPOs,” he added.

Wong also noted that the largest IPO in Southeast Asia in the first half of 2023 came from Indonesia’s PT Trimegah Bangun Persada Tbk, which raised US$683 million (RM3.1 billion) and reached a market capitalization of US$5.4 billion (RM 24.7 billion).