South-East Asia’s exchanges could see some solid initial public offering (IPO) activity in 2023 as their domestic companies grow and their pools of liquidity grow, industry watchers said.
While market sentiment will remain weak in the first few months of the year, listings could pick up by the second quarter.
Singapore, Malaysia, Thailand, Indonesia and the Philippines collectively saw 149 listings in 2022, versus 132 recorded in 2021, showed Bloomberg data in late December.
The total amount raised was sharply lower: US$7.3 billion, compared with US$12.5 billion a year earlier.
Fundraising activity was impacted by market weakness and higher risk aversion, although South-east Asia came off relatively well.
Tay Hwee Ling, disruptive events advisory leader for South-east Asia and Singapore at Deloitte, said the decline in funds raised has been less than that in major markets such as the US, UK and Hong Kong.
The domestic growth story appears to have been a key driver of that resilience, and this trend is expected to remain in place next year.
The Indonesia Stock Exchange led the region in terms of volume, with some 59 IPOs, while the Stock Exchange of Thailand was on top in terms of proceeds, with a total offer size of US$3.5 billion.
Vineet Mishra, head of investment banking for South-east Asia at JPMorgan, said: “Companies in Thailand, Indonesia and the Philippines tend to list in their local markets, and we see good-quality pipeline in domestic consumer companies.”
Three of the top five IPOs in the region came from Thailand – namely Thai Life Insurance, Betagro and I-Tail Corp, each of which raised over US$500 million.
Such listings were instrumental in Thailand’s outperformance, said Eng-Kwok Seat Moey, group head of capital markets at DBS Bank.
She noted that domestic fund support as well as international investor interest played a key role in their successful completion.
“We expect to see this trend to continue going into the new year, as there are still several sizeable IPOs waiting for the right window to launch there,” she added.
Indonesia also had two IPOs that raised over US$500 million: GoTo in April, as well as online retail business Global Digital Niaga.
The sizeable listings in Indonesia and Thailand are an indication of the deep liquidity that has been built in these countries’ markets, said Tham Tuck Seng, capital markets leader at PwC Singapore.
“If we look for plain-vanilla IPOs to raise funds, in these regional markets, their depth of liquidity is comparable to Singapore,” he said, noting that this presents competition for Singapore to attract regional companies to list on the Singapore Exchange (SGX).
Singapore’s advantages, relative to its peers, would be its reputation as a destination for real estate investment trusts and secondary listings, Tham said.
Deloitte’s Tay, meanwhile, noted that Malaysia was a “star” in 2022, with IPOs raising more capital than they did in pre-pandemic years.
Bursa Malaysia recorded an increase in proceeds, bucking the regional trend of declines. According to Bloomberg data, there were 30 offerings in 2022 raising US$812 million – versus 21 offerings raising US$594 million last year.
PwC’s Tham believes the market could be one to watch in 2023, amid expectations for greater political stability with the new government recently formed: “The stock market has given them credit, in the sense that the stock market has gone up with the new government coming in.”
Smaller listings
The number of large listings, above US$1 billion, was fewer than seen in 2021, although market watchers said this was true worldwide.
Deloitte’s Tay observed that while there was a decline in listings from large and mid-sized companies, the number of smaller companies with a market capitalisation of under US$500 million going for an IPO remained relatively stable.
“Business owners know that the headwinds are coming,” she said.
“Most of the companies – when they are nearer to the IPO (or) ready for listing – for the smaller-sized companies, they will go ahead and press the button to list so that they can raise the funds to weather challenges,” she said.
Bigger companies, however, are able to hold the IPO and wait for a better time to list, she added.
Will companies that put a pin in their IPOs come to market in 2023?
A gloomy outlook worldwide, fears of higher inflation and recession risks are expected to weigh on market sentiment.
Experts therefore believe it may take some time before activity picks up significantly in the region.
“As we head into 2023, we still expect global IPO sentiment to remain subdued in the early going, with the broader pipeline likely to begin to pick up later in the second quarter of 2023,” DBS’ Eng-Kwok said.
Tay added: “While there are challenges ahead of us, what we can see is South-east Asia as a whole has a high proportion of young population, which means that the economy will grow, the business will grow.”
She noted that larger companies are waiting for the right time to go to market, while smaller companies are looking for a platform to raise funds and sustain themselves. “While having a good growth story, the businesses will need to show strong foundation (and) a path to profitability as well,” she said. “With all those elements in place, I will believe that there will still be blockbuster (IPOs) coming out from South-east Asia.”
