Investors are increasingly paying attention to the Southeast Asian region. With growth potential and a positive outlook, there continues to be an influx of foreign direct investment into the region. This is boosted by themes such as the region reopening its doors, the restoration of the tourism industry and a booming domestic demand.
Together, these factors have contributed to the positive economic growth in the region despite the global economic uncertainties.
However, headwinds still persist for the region, namely in themes of the Covid-19 pandemic, the Russian-Ukraine situation, geopolitical instability, as well as rising inflation and interest rates. Despite headwinds, the International Monetary Fund (IMF) expects Southeast Asia to be the world’s fastest growing region, with the five largest economies – Indonesia, Malaysia, Philippines, Singapore and Thailand – expected to expand at the rate of at 4.5% in 2023 and 4.6% in 2024.
This can be seen in the number of companies publicly listing within the region.
According to Deloitte’s Southeast Asia Mid-year IPO Snapshot 2023, in the first half of 2023, the Southeast Asia IPO capital market achieved 85 IPOs, with US$3.3 billion ($409.6 billion) in IPO proceeds raised and an IPO market capitalisation of US$20.1 billion.
Comparing to the same period a year ago, the number of new IPOs increased by 16% y-o-y from 73, while IPO proceeds gained 5% from US$3.1 billion. This was largely due to the three sizable IPOs in Indonesia that had each raised more than US$500 million in 1H2023, as compared to only one blockbuster IPO (PT GoTo Gojek Tokopedia Tbk in Indonesia) that had raised US$1 billion in 1H2022.
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However, there was a sharp decrease of 43% in market capitalisation from US$35.4 billion a year ago due to PT GoTo Gojek Tokopedia having an exceptionally large market capitalisation of US$27.5 billion in 1H2022.
With the large IPOs in 1H2023 all coming from Indonesia, it is no surprise that Indonesia is at the top of the leader board at 70% -- it had 44 IPOs during the period, and listings include an a nickel miner that raised approximately US$683 million, and an integrated electronic vehicle battery materials company that raised approximately US$627 million.
Thailand follows at 16% -- and includes four listings of a cosmetic surgery hospital that raised approximately US$91 million. Malaysia trails behind at 11%, with the country targeting for 39 companies to IPO in this year alone.
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Singapore’s IPO performance however did not match up its neighbours. In 1H2023, Singapore saw just three IPOs with $28 million in proceeds raised and an IPO market capitalisation of $137 million. The three companies listed this year are YKGI YK9 , Ever Glory United Holdings and Pasture Holdings. They were listed on the Catalist board. There has yet to be a Mainboard listing this year.
Meanwhile, LYC Medicare Singapore has just lodged its preliminary prospectus on June 30.
Singapore’s IPO performance has been rather slow. In 2022, the Singapore Exchange S68 (SGX) saw more delistings compared to listings. Last year could possibly be a record high of delistings for SGX, with 21 companies leaving the exchange and just 13 companies making their listing debuts.
Aside from that, Deloitte has also noticed that there has been an absence of REITs/trusts and SPAC (special purpose acquisition company) listings in the past two periods.
Deloitte has attributed the lack of REITs seeking a public listing to the increasing interest rate environment. As such, REIT aspirants would have to factor these increase borrowing costs which might postpone listing plans. “We expect the REIT trend to come back once interest rates stabilises,” says Deloitte.
While each of the three SPACs have been engaged in active discussions with potential targets, they have not yet entered into any written binding acquisition agreement in relation to a potential business combination.
“It is important to note that SPACs have a timeframe of up to 24 months, with the possibility of a 12-month extension upon meeting certain conditions, SPAC aspirants are likely adopting the wait-and-see approach before we can see more SPAC IPOs come on board,” says Deloitte.
SGX may be somewhat lacklustre, there has been a handful of IPOs on Nasdaq from Singapore and Malaysia, notably in the industries of real estate services, biotechnology and vessel refuelling. Deloitte expects this trend of Southeast Asia companies heading for US IPOs to continue.
Overall, while taking into account possible changes to global events, Deloitte remains cautiously optimistic about the region’s prospects for the second half of 2023.
