Southeast Asia IPO Market Remains Lukewarm In Q1: EY

Looking at Global IPO trends in Q1 2024, EY noted the year having kicked off on a cautiously optimistic note, marked by a selective thaw following a quieter period. The Americas and EMEIA IPO markets had a bright start in 2024, increasing global proceeds. However, the Asia-Pacific region started on a weak note, weighing down the overall global volume. For Q1 2024, the global IPO market saw 287 deals raising US$23.7b, a 7% decrease in volume but a 7% increase in proceeds year- over-year (YOY), respectively.

In Q1 2024, EY said a majority of key IPO markets witnessed a significant number of newly issued IPOs whose current share prices surpassed their offer prices. This trend could indicate an improvement in valuations and pricing levels, reflecting growing confidence among issuers and investors.

An IPO is one of the pinnacle achievements for private equity (PE) firms, serving as a public showcase of their acumen and a defining milestone in their growth journey. In Q1 2024, approximately 10 PE-backed IPOs came to the market, five of which were featured among the top 10 global IPOs, a testament to their significant market presence

The promise and reach of the artificial intelligence (AI) vertical is currently experiencing significant growth within the private realm, with the majority of AI and AI-associated businesses still in the seed or early stage of venture capital (VC) rounds. This suggests there could be a surge in IPOs in future years as these companies mature in the private domain before making
a public debut.

Americas and EMEIA recovering; Asia-Pacific plunging

The global IPO market has experienced significant shifts in geographical composition, driven by ongoing macroeconomic and geopolitical dynamics.

Across Southeast Asia, IPO activity was similarly lukewarm, with a total of 38 deals raising US$1.0b, down from 51 deals raising US$1.4b in Q1 2023. Exchanges in Southeast Asia that were most active in Q1 2024 were Indonesia (20 IPOs raising US$224m), Malaysia (9 IPOs raising US$279m) and Thailand (6 IPOs raising US$273m). During the quarter, the Philippines,
Singapore and Sri Lanka each saw 1 IPO on their exchanges, raising US$202m, US$20m and US$2m respectively.

Chan Yew Kiang, EY Asean and Singapore IPO Leader, noted the IPO market in Southeast Asia was subdued as high interest rates and inflationary pressures continued to impact the confidence levels of both investors and issuers. This challenging economic environment has prompted companies in the region to recalibrate their strategies, placing a heightened emphasis on achieving profitability. As inflationary pressures begin to subside, the anticipated reduction in interest rates is likely to create a more favorable climate for IPOs. A strong performance from the global IPO markets will encourage Southeast
Asian companies that have been hesitant to go public to re-evaluate their position.”

The IPO market thus far in 2024 has shown signs of vigor, with an upswing in IPO activity. Despite the restrained overall market activity in previous years, there’s an uptick in enthusiasm from both IPO issuers and investors, hinting at shifting market dynamics and a more welcoming landscape for public listings​​.

The global economy will remain on a soft growth trajectory in 2024, with developed markets likely to see modest growth while emerging markets stay on a firmer growth path. Stock markets have already priced in the expectation of rate cuts in various major economies.

Just as investors and IPO candidates adapt to the new norm of higher interest rates and reduced liquidity, they will also need to navigate through additional layers of complexity in the geopolitical and global election landscape in the IPO market. As elections this year amplify uncertainty, IPO candidates will need to closely monitor election outcomes and assess how
specific policies could affect stakeholder interests and re-evaluate IPO strategies and timing as necessary.

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