Analysis of Factors Deteriorating the IPO Environment in Southeast Asia.

In the second half of 2023, the amount of capital raised from initial public offerings (IPOs) in Southeast Asia reached only $1.6 billion, a 63% decrease compared to the same period last year. There were 71 IPOs, a 21% decrease, according to analysis by Nikkei and US data provider Dealogic.

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The Indonesia Stock Exchange (IDX) expects more than 60 IPOs in 2024. Photo: Nikkei Asia

Previously, according to Dealogic data, the number of IPOs and the amount of funds raised have increased on ASEAN stock exchanges, with Indonesia being the shining star in the first half of 2023. The number of IPO deals in ASEAN reached 79, up 14% compared to the same period last year, and the capital raised reached $4.1 billion, up 43%.

Two main reasons

Analysis by Nikkei and Dealogic states that ASEAN companies are hesitant to list due to domestic elections and the sluggish economic situation in China.

Thailand recorded the largest decrease in fundraising in the region, with a sharp 75% decrease to $773 million. “No large companies participated in the market, especially in the second half of the year. It is the result of the delay in forming the government after the general election in May 2023. The political context has made investors lose confidence. The number of IPOs will depend on the economic situation. If the economy is good, there will be more IPOs in 2024,” said Natthapol Khamthakrue of Yuanta Securities, based in Bangkok, in response to Nikkei Asia.

However, Thailand is the largest fundraising country in the ASEAN region, with 6 companies listed in the top 10.

SCG Decor, a subsidiary specializing in tile and bathroom accessory production of SCG Group, raised $145 million through the IPO. This is the largest IPO deal in Thailand. As the Thai population ages and is expected to not increase significantly, SCG Decor plans to use the capital to expand into neighboring countries such as Indonesia and Vietnam.

Other Thai companies related to aviation have also boosted their IPOs. For example, Asia Network International, a general sales agency for airlines. Or companies like information technology and communication company Samart Corp., which listed its subsidiary Samart Aviation Solutions, specializing in aviation technology in Cambodia.

Thailand is not the only ASEAN country where the political situation affects IPO plans. In Indonesia, most businesses are “waiting to see” the results of the presidential election in February. Businesses are delaying their IPO plans, as they believe that investors will stay on the sidelines until they have a better understanding of the government’s economic policies.

As a result, the number of IPO deals in the second half of the year decreased from 42 to 31. The Indonesia Stock Exchange (IDX) expects only over 60 companies to IPO in 2024, a decrease compared to the 79 companies in 2023.

Malaysia ranked third in both value and number of IPOs, with 15 companies listed and attention focused on precision equipment manufacturer CPE Technology. Wong Kar Choon, audit partner at Deloitte Malaysia, said: “The IPO market will be more active in 2024, due to strong retail and organizational reorganization demand, especially for consumer and technology sectors or those related to technology.”

The sluggish Chinese economy also casts a shadow on everything. Because the world’s second largest economy has a significant impact on Southeast Asia, especially countries with export-oriented economies.

Leading construction materials conglomerate Siam Cement Group (SCG) of Thailand is postponing the IPO of its chemical subsidiary. Initially, the deal was expected to be completed in 2022, raising 38.5 billion baht ($1.08 billion) and becoming the largest IPO deal in baht ($1.08 billion) to date. CEO Thammasak Sethaudom said more time is needed to prepare, as the listing will not bring any profit in the current environment.

New stars emerge

Renewable energy companies continue to carry out IPOs in the second half of 2023. This group believes in the prospects of emission reduction processes in ASEAN.

Indonesia’s Barito Renewables achieved the largest IPO deal in this period. Under the sponsorship of the leading Barito Pacific Group in Indonesia, the subsidiary has raised about $200 million by selling 3% of its outstanding shares. Barito Renewables operates three geothermal power plants with a total capacity of 890 MW on the island of Java. The company has also decided to acquire a wind farm on Sulawesi Island. With a capacity of 75 MW, this is one of the largest wind power plants in Indonesia.

Investors are placing high hopes on the growth of Barito Renewables, so the stock price has risen sharply. The market capitalization of the subsidiary was 130 trillion rupiah ($8.23 billion) on the listing day, but soared five times to 672 trillion rupiah, ranking third on the IDX as of January 29.

Consumer and entertainment-related businesses are also ready to raise capital amid increased private spending after the Covid pandemic.

Nusantara Sejahtera Raya, Indonesia’s leading cinema operator, has raised the second-largest capital. Currently operating over 200 cinemas nationwide, Nusantara plans to use the raised capital to increase the number of cinemas to 2,000 within a few years.

Some analysts predict that the IPO environment in ASEAN will improve in 2024 after global interest rate hikes cool down, as high interest rates decrease stock prices. PwC stated in a report earlier this year that the IPO market in Southeast Asia will “grow and recover” in 2024 if the “overall macroeconomic environment remains stable, especially interest rate environment.”

Ricky Ho

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