Malaysia IPO market doubled despite election year

As at Nov 11, Malaysia has seen 31 successful IPOs in 2022 compared to 29 companies listed in 2021

THE Malaysian IPO market has emerged from the pandemic with a 102% increase in the proceeds raised at US$681 million (RM3.13 billion), said Deloitte. 

As at Nov 11, Malaysia has seen 31 successful IPOs in 2022 compared to 29 companies listed and US$337 million in funds raised in 2021.

In a press release today, Deloitte said the surge was driven by investors’ demand for good fundamental companies.

In particular, it said the number of ACE listings doubled from 11 in 2021 to 22 in 2022, which is impressive given the economic climate.

Deloitte said the interest-rate hike would potentially encourage more companies with good business fundamentals to seek listing as they can leverage on the equity market for a diversified and cheaper funding base. 

“Notwithstanding the impact of the elections on the IPO market, there remains a steady pipeline of companies looking to tap the capital markets,” Deloitte’s Malaysia disruptive events advisory leader Wong Kar Choo said.

“The strong performance in 2022, against a backdrop of global inflation, rising interest rates and the threat of a recession, is proof of the resilience of the Malaysian capital market,” he added.

Commenting on the South-East Asia region, Deloitte’s South-East Asia and Singapore disruptive events advisory leader Tay Hwee Ling said there is still room for high growth as the region emerges from the Covid-19 crisis.

Tay notes that prior to the Covid-19 pandemic, the IPO activity moves in tandem with the economy and GDP growth (Source: Deloitte SEA)

On the outlook for the remaining year through to 2023, she said, “We expect IPO activity to go through cyclical highs and lows, as the market re-calibrates from the pandemic mindset to ‘regular programming’.

“While valuations may be generally lower for tech companies now, the ones with solid business fundamentals and the ability to prove profitability will still be able to achieve optimal market valuation and benefit from the capital markets,” she explained.

Deloitte said the number of IPO listings across South-East Asia is expected to hold steady in 2022 but expects funds raised to halve compared to previous year.

With momentum slowing down from 2021, it noted that IPO funds raised were subdued across the capital markets in South-East Asia for the first 10.5 months of this year, even though the IPO count and IPO market capitalisation are expected to hold steady from the previous year.

Data by Deloitte as at Nov 11, 2022, showed that companies in South-East Asia raised US$6.3 billion from 136 IPOs to-date this year, down 52% from a record US$13.3 billion from 152 IPOs in the full year of 2021.

“This indicates a higher number of small listings this year, mostly from smaller companies that needed the platform to raise funds in today’s challenging market environment,” it said.

With only two blockbuster IPOs this year, namely PT GoTo Gojek Tokopedia Tbk and Thai Life Insurance, Deloitte said this could mean that the bigger companies are holding out and postponing their listing in anticipation of better market conditions.

Deloitte pointed out that the Covid-19 pandemic spurred a flood of new retail investors into the stock market and consequentially there was a boom in the IPO market globally in 2021, with the US and UK witnessing a record amount of IPO funds raised.

Deloitte said South-East Asia capital markets too enjoyed a successful year in 2021.

This momentum slowed down this year, albeit with South-East Asia weathering the crash slightly better with a 52% drop, compared to the 95% and 91% decrease in IPO proceeds in the US and UK respectively.

Tay noted that prior to the Covid-19 pandemic, the IPO activity moves in tandem with the economy and GDP growth. However, he said, the inverse has happened in the last two years.

“Just as the world is winning the fight against the pandemic, the reopening of the world economies and borders have fuelled a rise in global inflation from 4.7% in 2021 to 8.8% in 2022, and consequently an increase in federal interest rate of almost 4% over the course of the year in a bid to tame the surging inflation.

“In the face of these macroeconomic factors, South-East Asia IPO market has held up considerably well, while we continue to see the growth potential in our economies,” Tay said. — TMR / graphic by TMR