Bumper year for IPOs but more needs to be done to attract foreign investors

Bursa recorded an increase of 17% to 35 IPO in 2022 compared to 30 in 2021 


THE local bourse could see up to 40 IPO this year from the recorded 35 listings in 2022. 

Tradeview Capital Sdn Bhd CEO Ng Zhu Hann believes that 2023 will see another record year for Bursa Malaysia due to the post-Covid-19 recovery. 

“Bursa Malaysia recently announced that there will be more listings this year compared to 2022 and I believe we might even reach 40 listings in 2023 if all goes well,” Ng told The Malaysian Reserve (TMR). 

Bursa Malaysia Bhd recorded an increase of 17% to 35 IPO in 2022 compared to 30 in 2021, bringing in RM11.15 billion market capitalisation with the ACE Market peaking since inception. 

The ACE Market listings of 25 IPO made up the bulk of the offering on Bursa Malaysia Securities compared to the Main Market and the LEAP market last year. LEAP stands for Leading Entrepreneur Accelerator Platform Market. 

The record number of new listings in 2022 closely follows the reopening of the economy as more recovered companies sought listing. 

Out of the 25 ACE Market listings, 20 of the companies’ shares trade above the IPO offer price, capturing both investor interest from the traditional and the retail investors. 

However, the Main Market led the IPO market in terms of total proceeds raised, accounting for 63% or RM2.2 billion of the total RM3.5 billion, versus the ACE Market’s RM1.2 billion and RM32 million from the LEAP Market. 

Ng said the success of ACE market is partly due to improved efficiency of processing for ACE Market IPO. Since Jan 1, 2022, the exchange is the sole approving authority for ACE Market IPO and under the new regulatory framework, it has become a one-stop centre for all ACE Market IPO approvals. 

“In the past, ACE Market required the Security Commission Malaysia (SC) participation in terms of document verification and approval but now it goes straight to Bursa Malaysia so the process is much faster and efficient,” he said. 

Among the companies that were listed on the ACE Market in 2022 include Unique Fire Holdings Bhd, UMediC Group Bhd, Ecoscience International Bhd, Infoline Tec Group Bhd, YX Precious Metals Bhd and SFP Tech Holdings Bhd. 

A Leap of Faith 

On the LEAP Market, Ng believes that the platform could do better but is hindered due to limited participation. 

In terms of market activity, only 10% of a LEAP-listed company is tradable. This means, only a handful of investors can participate in the LEAP Market and these are mainly accredited investors. 

On the other hand, the ACE Market is targeted at corporations with good business prospects, and is accessible to public and retail investors. Due to these differences, the requirements under the LEAP Market Listing Requirements are significantly less extensive compared to the ACE Listing Requirements. 

Ng believes Bursa Malaysia might even reach 40 listings in 2023

“For the LEAP Market it is a bit disappointing as only sophisticated investors and accredited investors can invest in the companies that are listed on the platform. That is why you can see the market barely has liquidity,” Ng told TMR. 

Subsequently, due to the nature of the Leap Market, its liquidity and trading volume are expectedly low. 

“Apart from the initial fund-raising exercise during the listing on the LEAP market, there is not much movement in the share price, less upside even for companies in the Leap Market that have good financial and reputation,” he added. 

This, Ng said, has led to some companies to delist from the Leap Market and subsequently re-list on the ACE market which is a bigger fundraising platform to support a company’s expansion plan. 

A good example is Penang-based TT Vision Holdings Bhd (TTVHB) which obtained the approval from Bursa Securities to list on the ACE Market, six months after its delisting from the LEAP Market in May last year. TTVHB, which is involved in the development and manufacturing of machine vision equipment and provision of related products and services, was previously listed on the LEAP Market on May 9, 2019. 

Despite its limitations, seven companies across different sectors were listed on the LEAP Market last year. Ng expects companies in the healthcare, consumer-related, technology sector such as green energy or renewables that are environmental, social and governance compliant, to be more receptive to the LEAP Market. 

Meanwhile, Astramina Advisory Sdn Bhd MD Datin Wong Muh Rong pointed out the lack of a transfer listing framework to define a process of graduation from the LEAP Market to the ACE or Main Markets. 

She said without clarity on the transfer framework, several companies listed on the LEAP Market have withdrawn their listing status as they could no longer wait for the framework to be developed. 

On Aug 10, 2022, Bursa Malaysia Securities Bhd issued a consultation paper to seek public feedback on the proposed framework for transfer of listings from the LEAP Market to the ACE Market. 

Bursa Malaysia recently said it is targeting to release the framework by the first half of 2023, which it believes would increase the number of IPOs in the LEAP Market as these companies will have a clearer view of how they can graduate to the ACE Market. 

Foreign Investors 

Wong said liquidity in the market plays an important aspect in determining the market vibrancy. 

“Higher liquidity translates to a positive spillover effect to the underlying economy and an important parameter impacting its (the market) attractiveness, as it is part of an investor’s investment decision,” she opined. 

Nonetheless, Wong said, liquidity is a long-haul issue and cannot be resolved overnight. 

“Yes, we need good companies, but we also need government intervention and incentives for capital markets to be vibrant. For now, the foreign investors are out of Malaysia. We are probably at one of our lowest levels at all times. We have some indication that it might be going up soon, but this will also depend on the revised Budget that is to be tabled on Feb 24,” she added. 

We don’t have a dividend yield nor a ringgit revaluation play, says Wong

For the upcoming re-tabled Budget, Wong said it would be good if the government could offer a few incentives and positive policies for the capital market besides measures to improve the government coffers. 

To attract foreign companies onto the local stock exchange, she said, what is needed are good companies with good earnings prospects. 

“We need companies that can deliver good earnings per share to attract investors. So, on the business front, we need to be more friendly to foreign investors. 

Wong urged the government to offer tax incentives and to allow for businesses to be set up in a more efficient manner. 

“I think Malaysia has the most cumbersome set of processes when it comes to starting a business here. We have the highest level of permits required before a corporation can be opened for business. It is too difficult for people to start a business here, and this factor alone has shunned many investors from considering Malaysia,” she said. 

Capital Markets 

For the capital markets, Wong said, the authorities should also expedite and facilitate capital market or corporate exercises. Unfortunately, she noted that Bursa Malaysia is not as attractive when compared to the regional stock markets 

“Quite a number of foreign houses, the latest being CLSA Ltd, has downgraded Malaysia on the back of its expensive valuations and poor earnings per share growth. There are no exciting growth prospects nor defensive quality of the market presently. We don’t have a dividend yield nor a ringgit revaluation play. 

“Indonesia and Vietnam are seen as more attractive emerging markets. Furthermore, with China having abandoned its ‘Zero Covid’ policy, many investment houses are back to increasing a higher weightage on China,” she said 

Ng added that political instability in the last five years has posed a challenge for the local stock to attract foreign investors. 

“In 2018, there was about 24% foreign participation and today as of 2022, it is only 20.6%. This shows the foreign participation has fallen close to historical low for our local stock market whether it is Bursa Main market or ACE Market,” Ng said. 

In order to boost liquidity and vibrancy in the stock market, he noted three main elements needed, namely the participation of the local institutional fund, retail investors and foreigners. 

While Bursa Malaysia has shown a plausible effort in terms of encouraging and promoting many listings as compared to before Covid-19, he said to spur capital market growth, more need to be done to cultivate the local IPO market vibrancy. 

To counter this, Ng suggested Bursa to have more friendly listing requirements, reduce costs and encourage direct consultations with companies that wish to go for listing. 

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