Malaysian IPO market surges

The increase had been driven by the investors’ demand for good fundamental companies 


THE Malaysia’s IPO market has emerged from the pandemic with a 102% increase in the proceeds raised at US$681 million (RM3.1 billion), according to Deloitte. 

The surge had been driven by investors’ demand for good fundamental companies. In addition, the number of ACE Market listings doubled from 11 in 2021 to 22 in 2022, which is impressive given the economic climate, the management consulting firm said. 

It added that 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. 

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

“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 said in a recent statement. 

With momentum slowing down from 2021, Deolitte said 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, which was 52% down 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. 

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

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

It 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,” it added. 

Commenting on this, Deloitte South-East Asia and Singapore disruptive events advisory leader Tay Hwee Ling said prior to the Covid-19 pandemic, the IPO activity moves in tandem with the economy and GDP growth. 

However, she noted that 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 macro-economic factors, the South-East Asia IPO market has held up considerably well, while we continue to see the growth potential in our economies,” she said. 

On the outlook for the remaining year through to 2023, Tay said there is still room for high growth in South-East Asia, as the region emerges from the Covid-19 crisis. 

She added that Deloitte is expecting IPO activity to go through cyclical highs and lows, as the market recalibrates 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 said. 

  • This article first appeared in The Malaysian Reserve weekly print edition