Malaysia beats region in most IPO proceeds raised in 1Q22, says EY

The Asia-Pacific region started the year strongly with an 18% YoY rise in proceeds raised despite a 16% decline in deal numbers in 1Q22 

by S BIRRUNTHA / Pic by MUHD AMIN NAHARUL

MALAYSIA’S equity market topped other Asean markets in the amount of IPO proceeds raised during the first quarter of 2022 (1Q22), in a period that saw Asean’s exchanges experience a 57% decline in proceeds raised to US$1 billion compared to US$2.4 billion (RM10.15 billion) raised in 1Q21. 

Ernst & Young Global Ltd (EY) noted the fall in value comes despite Asean’s exchanges saw a 32% increase in deal numbers at 29 IPOs in 1Q22, up from 22 IPOs in 1Q21. 

“During the quarter, Indonesia’s stock exchanges were the most active by deal numbers (12 IPOs raising US$219 million), while Malaysia’s exchange led by proceeds (US$362 million via five IPOs),” it stated in a release yesterday. 

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EY noted the notable decline in proceeds was due to the lack of a mega IPO in 1Q22 compared to one mega IPO a year ago. 

Thailand’s exchanges saw five IPOs raising US$228 million, the Philippine Stock Exchange had four IPOs raising US$201 million, while Singapore’s Catalist welcomed three IPOs raising US$17 million. 

E&Y LLP Singapore and Brunei managing partner and EY Asean IPO leader Max Loh said geopolitical tensions, the ongoing Covid-19 situation, supply chain woes, tightening of monetary policy and escalating costs are significant factors weighing down on economic and IPO activity. 

“The IPO market remains receptive to quality high-growth companies, but volatility, uncertainty and valuation expectations will need to be tempered before a resurgence in IPO activity can happen,” Loh stated. 

EY added the Asia-Pacific region started the year strongly with an 18% year-on-year (YoY) rise in proceeds raised despite a 16% decline in deal numbers in 1Q22. 

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Four of the seven mega IPOs in 1Q22 globally were listed in this region including two of the quarter’s largest IPOs by proceeds. 

The region saw 188 IPOs raising US$42.7 billion in proceeds, the highest 1Q proceeds in 21 years. 

In terms of sector activity, industrials led by volume with 40 IPOs worth US$3.3 billion followed by materials with 37 IPOs worth US$5.3 billion while energy and telecommunications led by proceeds raised at US$11.2 billion via eight IPOs and US$8.5 billion via three IPOs respectively. 

EY revealed IPO activity in the Americas region completed 37 deals in 1Q22 raising US$2.4 billion in proceeds, a decline of 72% in the number of deals and a 95% fall in proceeds YoY. 

Europe, the Middle East and Africa markets IPO activity in 1Q22 reported a total of 96 deals raising US$9.3 billion in proceeds, which declined by 38% and 68% YoY in terms of number and money raised respectively. 

EY global IPO leader Paul Go said the decrease in IPO activity was not unexpected compared to 1Q21 as the latter period was the most active quarter in over two decades. 

“The market shock from geopolitical tensions and other economic concerns in the second half of the quarter created volatility and impacted the capital market. 

“While markets continue to be volatile, and uncertainties over economic recovery remain for reasons including continuing concerns around Covid-19, there is a risk that IPO activity will continue to slow further with candidates choosing to postpone their transactions,” he said.

Go noted companies need to be well prepared to access the market when the window opens, likely for a shorter time frame, and include a careful review of business models and preparation of alternative fundraising plans.

EY added volatile market conditions resulted in a significant slowdown in new listings in 1Q22, following record-high levels of global IPO activity in 2021. 

The firm highlighted that 2022 started strongly, continuing the momentum of 4Q21, with January producing the strongest opening month in 21 years by proceeds raised. 

However, by the second half of the quarter, worldwide stock market declines shifted the trajectory dramatically in the opposite direction, resulting in a significant drop in overall activity. 

In 1Q22, the global IPO market saw 321 deals raising US$54.4 billion in proceeds, a decrease of 37% and 51% YoY respectively.