Southeast Asia has raised approximately $5.5 billion via initial public offering (IPO) in the first 10.5 months of 2023, the lowest in eight years, Deloitte said Thursday.
Deloitte said in a statement that the total IPO raised down from $7.6 billion in 2022.
Meanwhile, the IPO amount for the first 10.5 months of 2023 stands at 153, also down from 163 in the full year of 2022.
Indonesia, Thailand and Malaysia collectively raised approximately $5.4billion, accounting for 98 percent of the total funds raised across Southeast Asia.
According to Deloitte, Southeast Asian companies are thriving and have the ability to go beyond their shores for cross border IPOs.
This is driven by expectations of favorable valuations, enhanced liquidity, industry comparability, and investor familiarity with certain sectors.
Correspondingly, it said stock exchanges across the globe are paying more attention to Southeast Asian companies and are establishing new initiatives or revamping existing ones to improve their appeal as gateways to attract these high growth businesses.
Meanwhile, there is an observable trend of an increasing number of companies listing on the secondary boards of Southeast Asian bourses.
It said listing on the junior boards of the stock exchanges, which cater to high growth small and medium enterprises (SMEs), may be seen as a springboard to the Main Board for some IPO aspirants.
It also said the listed-company status may propel them towards business growth expansion and further fund raising.
It also noted there are many small and medium-sized enterprises (SMEs) in Southeast Asia with good growth potential, and a good financial ecosystem can provide these companies with the right environment to thrive and maximize this potential.
Overall, the energy, resources and industrials and consumer industries are two of the strongest in the Southeast Asian market.
According to Deloitte, the push to pursue green technologies has created favorable conditions for companies in the energy, resources and industrials industry, which make up the top five listings in Southeast Asia in the first 10.5 months of 2023.
As urbanization continues to shape consumer behaviour across Southeast Asia, there has also been a shift in the characteristics of companies in the consumer industry that are growing and seeking listings.
“The challenge of sustaining a vibrant and attractive cash equities market is not unique to the Southeast Asian region,” Tay Hwee Ling, Disruptive Events Advisory Leader, Deloitte Southeast Asia and Singapore.
According to her, globally, the number of IPOs and IPO proceeds raised has normalized to pre-COVID-19 levels.
She said this is driven by the trend of companies staying private for longer, and more recently, against the backdrop of a challenging global macroeconomic and interest rate environment.
She noted that companies considering possible public listings have several commercial objectives in mind.
While the regional bourses can think of innovative ways to attract listing candidates, she opined that there are limits to how their measures can directly influence listing decisions.
She noted investors will ultimately determine how to allocate their capital based on their strategies and how they view the market.
She also noted governments recognize the value of an attractive equities market as part of the overall financial services ecosystem and must constantly adapt to the shifts in global capital markets.
On the outlook for the remaining year through to 2024, Tay said that amidst the more challenging macroeconomic environment, many stock exchanges are dealing with the trend of local Southeast Asian companies looking to list on large overseas markets to access a deep capital market and investor base, or where they perceive they can secure the best valuations.
“For quite a few companies, listing in the United States is attractive due to the US’ deeper pool of investors and liquidity,
“Companies may choose to list in jurisdictions that give them better exposure to key target markets,” she added.
Indonesia
Indonesia saw 77 IPOs which raised $3.6 billion, making up half of the region’s number of IPOs and 66 percent of the total IPO amount raised across the six exchanges.
This makes it the fourth strongest stock exchange year-to-date in 2023 globally, behind only China, the United States and the United Arab Emirates.
According to Deloitte, Indonesia has managed to sustain its momentum, even in the face of pandemic-related challenges that began in 2020, after it bounced back in 2021.
It said this accomplishment underscores Indonesia’s lasting attractiveness to investors, backed by its dedication to maintaining political and macroeconomic stability.
Notably, Indonesia has made significant contributions to the Southeast Asian IPO market, with six Indonesian companies featuring among the top ten listings in Southeast Asia.
“A new trend is on the horizon, marked by the global shift towards the renewable energy and electric vehicle battery sectors,” said Imelda Orbito, Disruptive Events Advisory Leader, Deloitte Indonesia.
According to her, Indonesia has set its sights on becoming a global hub in the electric vehicle supply chain, and the country is exceptionally well-positioned to attract both foreign and domestic investors alike.
“Notably, the substantial number of IPOs originating from the renewable energy and metals/minerals sector hint at the potential for 2023 to be a standout year for the Indonesian Stock Exchange,” she added.
Thailand
With $1.06 billion raised through 37 IPOs thus far, Thailand is also the runner-up in the region, said Deloitte.
The country’s consumer industry continues to pave the way, making up approximately 40 percent of the regional funds raised and 38 percent of the number of listings originating from this sector.
However, the country did not observe any blockbuster listings which were presented in 2022.
The interest rate environment and political stalemate has also resulted in the withdrawal of approximately $4.8 billion from foreign investors in the first 10 months of 2023.
“We continue to observe several IPOs from a diverse pool of industries on the Stock Exchange of Thailand, including fast-moving consumer products, life sciences & healthcare, and industrial products,” said Wilasinee Krishnamra, Disruptive Events Advisory Leader, Deloitte Thailand.
According to her, 2024 will be an exciting year as there are 38 companies in the listing pipeline.
“There is one company with an effective filing, and 12 companies have already obtained approval from the Thai Securities and Exchange Commission,
“The parliamentary endorsement of the new Prime Minister in August should bring stability and confidence to foreign investors after the resolution of the prolonged political stalemate,” she added.
Malaysia
Deloitte data showed the Malaysian bourses saw 28 IPOs raising $715 million in the first 10.5 months of this year.
Bursa Malaysia performed reasonably well, considering its target of 31 listings for the whole of 2023, said Deloitte.
It is also notable that its IPO market capitalization for 2023 to-date has already surpassed that of 2022.
Once more, the ACE Market dominated this year’s IPO with 21 listings, while the improvement in the performance of the Main Market was encouraging.
On the other hand, there was a slight dip in listings on the LEAP market, likely because companies were assessing the LEAP Transfer Framework before deciding on their listing.
“Malaysia’s IPO market remains active, led by quality issuers that sustained or exceeded their market capitalization upon listing, and supported by active investor participation,” said Wong Kar Choon, Disruptive Events Advisory Leader, Deloitte Malaysia.
According to him, the listing requirements for the ACE Market are more accommodating towards companies with good growth propositions, and the lower ticket size of IPO offer shares continues to attract a steady flow of investor participation.
He observed that, generally, IPOs with reasonable valuations generated strong interest from the market and a good majority continue to demonstrate decent post-IPO share price performance.
“The capital market initiatives that have been announced further have also boosted market vibrancy and enhanced investors’ access into the market,
“A formidable IPO pipeline is expected in 2024, buoyed by a healthy institutional and retail appetite, especially for consumer and tech or tech-related industries,” he added.
Singapore
Singapore saw five Catalist IPOs raising US$29 million in the first 10.5 months of this year, according to Deloitte.
Singapore typically has some sizable Mainboard IPOs, real estate investment trusts (REITs) or special purpose acquisition companies (SPACs) bolstering its overall IPO performance, which were sorely missing this year.
It is noted that REITs and Business Trusts have historically been the stronghold of the Singapore IPO market.
However, with the uncertainties surrounding interest rates, REIT aspirants may adopt a wait-and-see approach and postpone their listing plans.
Out of the three SPACs that were listed in early 2022, Temasek-backed Vertex Technology Acquisition Corporation (VTAC), may become the first SPAC to acquire a target firm.
It is noted that VTAC has inked a deal to buy Taiwanese live-streaming platform 17Live for over $900 million.
The conditional sale and purchase agreement is subject to approval by VTAC’s shareholder and SGX.
Deloitte noted that when that happens, the market may see more SPACs coming on board.
“While the Singapore IPO market may appear subdued this year, it is important to note the wealth of high-calibre Singaporean companies ready to explore cross-border listings on global exchanges,” said Darren NG, Disruptive Events Advisory Deputy Leader, Deloitte Singapore.
According to him, the companies are also enjoying international recognition for their robust business fundamentals.
“The comprehensive economic infrastructure and initiatives by the Singapore government in conjunction with SGX provides an ideal platform for companies aspiring to go public,
“Singapore, with its political stability and strong regulatory environment, sets the stage for unprecedented capital inflows, acts as a strategic bridge between United States and China, and is the regional headquarter of choice for numerous funds and family offices,” he added.
Vietnam
Vietnam saw only three IPO listings raising approximately US$7 million in the first 10.5 months of 2023, according to Deloitte.
The low number of IPOs was driven mainly by the tightened IPO and listing approval process, and higher net-withdrawal from foreign investors due to global and local factors affecting its market liquidity in 2023.
These unfavorable conditions, coupled with Vietnam’s falling VN-index performance since the first half of 2022, resulted in IPO aspirants delaying their IPO plans and waiting for the right moment to list.
“Although Vietnam’s stock indexes have recovered towards the end of 2023, it is still far from the 2021 and early 2022 peak,
“Nevertheless, the Vietnam government has introduced several measures to stimulate the economy and initiatives to improve the ratings of the Vietnam stock market to bolster investors’ confidence going into 2024,” said Van Trinh Bui, Assurance Leader, Deloitte Vietnam.