2017 ASEAN IPO market revitalised by record listings in Singapore and Malaysia

National flags and the Association of South East Asian Nations (ASEAN) logo on display ahead of the 27th ASEAN summit in Kuala Lumpur, Malaysia, November 18, 2015. REUTERS/Olivia Harris

Capital markets across Southeast Asia produced record-high capital raising activity in the first 11 months months of 2017. 144 initial public offerings (IPOs) saw S$10.4 billion ($7.71 billion) in total funds raised with a market capitalisation of S$33.9 billion ($25.1 billion) according to data from Deloitte Singapore.

This is the highest figure since 2014, reflecting positive listing decisions and investor confidence in Southeast Asian exchanges. The growth led by seven blockbuster listings includes two deals each in Malaysia and Singapore and three deals in Thailand.

Credit: Deloitte

Mainboard-listed NetLink NBN Trust took the top spot in Southeast Asia with S$2.45 billion ($1.81 billion) raised, creating the largest IPO in Singapore since 2011.

Malaysia’s Lotte Chemical Titan Holding Berhad raised the second highest amount at S$1.2 billion ($889.65 million), boosting Bursa Malaysia’s profile, despite a decline in the number of new IPOs.

Meanwhile, Indonesia and Thailand have consistently raised S$1 billion and S$2 billion respectively in the past four years. Jumbo listings in Southeast Asia’s IPO market contributed to the outstanding performance in terms of total IPO funds raised and the total number of new listings.

For 2018, Dr Ernest Kan, Global IFRS & Offerings Services Leader, Deloitte Southeast Asia is optimistic about the outlook for Southeast Asia’s capital markets.  “Against a healthy global backdrop and resilient domestic demand that supports growth with Southeast Asia’s GDP forecasted at 5.1% — way exceeding the Global GDP forecasted at 2.7%, we can expect the markets to remain dynamic and attractive to investors,” he said.

China is expected to play a major role in the region’s economy in coming years and impact the IPO market in the region, given Beijing’s commitment to One Belt One Road Initiative (OBOR), as well as its booming IPO market, which saw 377 IPOs in Mainland China and 121 IPOs in HK as of 31 October 2017.

Additionally, China is committed to opening its capital markets to foreign investors, as well as easing limits on foreign stakes in financial firms following the visit of President Trump of the US.

Also Read: HKEx launches new intiatives to encourage foreign listings

Malaysian IPO market

Largest enterprises by market cap on Bursa Malaysia. Credit: Deloitte

Given the robust GDP growth across Southeast Asia’s economies, Dr Kan expects to see this trend continuing into the next year with the liberalisation of China’s foreign investment policy and the steady rise of REITs and Business Trusts in each of the Southeast Asian markets which generally are of mega-size market capitalisations.

In Malaysia, the IPO capital market raised a total of S$2.4 billion ($1.77 billion) as at 15 November 2017, far exceeding 2016’s funds raised of S$377 million ($279.4 million). Despite the lower number of IPO listings in recent years, Gary Huang, Global IFRS & Offerings Services Leader, Deloitte Malaysia, expect this to improve.

Credit: Deloitte

In Malaysia, the demerger of Sime Darby Group will add two more listings for the year and initiatives by Bursa Malaysia to introduce the LEAP market (Leading Entrepreneur Accelerator Platform) for SMEs are expected to increase the number of IPOs.

“We have a huge SME market and many of these companies have the desire to list but may not be qualified or are not ready. While the LEAP Market is for sophisticated investors, it aims to provide a platform for SME companies to list as a PLC and acts as a feeder to Bursa’s Main and ACE Market,” Huang explained.

“The LEAP Market was introduced in June this year and we expect more SMEs to list in 201, in addition, the two we have today. With time, this will lead to an increase in the number of PLCs on Bursa’s Main and ACE Market” he added.

The LEAP Market is part of the SME Masterplan, which aims to raise the share of gross domestic product (GDP) contributed by SMEs (small & medium enterprises), with Malaysia being the first ASEAN country in ASEAN to introduce such a market. SMEs account for 97 per cent of businesses in Malaysia and are expected to form the nucleus of the future IPO market in Malaysia.

Singapore IPOs

The Singapore Exchange (SGX) – the largest bourse in Southeast Asia – saw 15 deals this year as at 15 November 2017 and the total amount of funds raised at S$3.7 billion have surpassed the last three years to be the highest in four years.

While the city-states contributed to only 13 per cent of total IPOs, it contributed to a sizeable 30 per cent of total amount raised in Southeast Asia from 2014 to 2017.

Credit: Deloitte

This includes two company IPOs and three trusts on SGX Mainboard with S$248 million and S$3.2 billion funds raised respectively, and S$1.1 billion and S$4.3 billion market capitalisation at IPO. On the Catalist board, there were 10 deals that raised S$202 million with a market capitalisation of S$1.1 billion.

Responding to the performance of the Singapore IPO market for 2017 after 10.5 months, Tay Hwee Ling, Global IFRS & Offerings Services Leader, Deloitte Singapore, pointed out that the city-state had already seen 15 deals as compared to 16 deals last year,  while the amount raised this year increased 61.8 per cent and IPO market capitalisation increased by 49.1 per cent.

Post 15 November 2017, the market saw one additional listing and three registrations/lodgements, which includes the listing of Cromwell European Real Estate Investment Trust (CEREIT), which posts a market capitalisation of EUR 865.69 million ($1.02 billion).

Deloitte expects Singapore’s IPO market to close the year with more than 20 IPOs.

“Liquidity in Singapore’s equity market remains high as there were more IPOs with public offer tranche in the last 10.5 months. Of the 15 IPOs to date, there were ten public subscriptions and all were oversubscribed at a median of 32 times and an average of 103 times,” Tay said.

Credit: Deloitte

Funds raised by the 19 IPOs totalled S$4.6 billion ($3.4 billion) – double the S$2.3 billion ($1.7 billion) in fundraisings in 2016. The 19 IPOs consisted of seven Mainboard listings and 12 Catalist listings. The market capitalisation of the 19 stocks on debut is also significantly higher, totalling S$8.3 billion ($6.12 billion), compared to S$4.4 billion ($3.26 billion) in 2016.

In total there were 16 IPOs last year, not including the secondary listing of Top Glove Corporation Berhad and Reverse Takeovers (RTO) of China Star Food Group and Golden Energy & Resources and one Global Depository Receipt (GDR).

According to the SGX, the seven Mainboard offerings have averaged a 6 per cent price gain from initial offer prices, whilst the 12 Catalist stocks averaged a 68 per cent gain from initial offer prices.

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