The pandemic and its related economic effects prompted a slowdown in initial public offerings (IPOs) in South-east Asia, as it did globally. However, there are indications that the region is set to see listing activity bounce back in the coming months.
The onset of Covid-19 gave rise to a dramatic, worldwide decline in IPOs, with April and May registering a 48% decrease in volume and a 67% drop in proceeds compared to the same period last year.
IPO activity in June remained muted in the Americas, Europe, the Middle East and Africa. However, listings increased in Asia Pacific compared with the same year-to-date figures in 2019: volume was up 2% and proceeds were up 56%.
This boost – driven by new listings in Hong Kong and mainland China, as well as stirrings of renewed activity in India – was small, yet significant enough to reassure investors of the resilience of the business environment.
The South-east Asian IPO market stands out: there were $4.6bn worth of IPOs through August, up from $3.1bn in the same months of 2019, according to data from Refinitiv.
It is worth noting that the companies sparking the most interest are those that have expanded their operations in response to the pandemic, or are proving financially resilient despite it. In South-east Asia – as in the rest of the world – the technology, industrial and health care sectors are dominating the IPO scene.
“ICT advances and improved connectivity, spurred by the consequences of the Covid-19 pandemic, have helped financial markets sustain domestic and international operations despite quarantine restrictions,” Emeterio Gonzales III, president of Philippine Equity Partners, told OBG.
A number of IPOs are set to take place in South-east Asia in the month of October. In late September the Philippines’ Securities and Exchange Commission approved the P41.55bn ($872.6m) IPO of Converge Information and Communications Technology Solutions.
The firm has benefitted from the dramatic increase in remote working brought about by the pandemic, and anticipates continued strong demand for its services. The company says that 90% of the IPO’s net proceeds will go towards accelerating the nationwide rollout of its fibre-optic network.
In Thailand, the IPO of SCG Packaging – the country’s biggest packaging company and a subsidiary of Siam Cement Group, a large industrial conglomerate – was initially approved in May but was paused during the height of the pandemic. It is now set to go ahead in October, and the company anticipates it could raise up to BT39.5bn ($1.3bn). That would make it Thailand’s second-largest IPO this year, after the $3bn raised by Central Retail in February.
“The packaging business has become a crown jewel… given the explosive growth of e-commerce and food delivery amid the pandemic,” Tawatchai Asawapornchai, deputy managing director of ASL Securities, told local media in September.
That same month the IPO of PTT Oil and Retail Business, the retail arm of Thailand’s state-owned oil and gas giant, was given the green light after the company first petitioned the Securities and Exchange Commission in April. The company’s president told media that cash from the IPO will be used to hire new graduates as part of efforts to get the wider economy back on track.
Meanwhile, in Malaysia, home improvement retailer Mr DIY Group is set to launch its IPO in October after it was postponed twice, once at the end of 2019 and again as a result of Covid-19 this year. The renewed listing is slated to raise $500m.
Various smaller IPOs met with success in Malaysia in recent months, including those of construction firm TCS Group Holdings, jewellery brand Aurora Italia International, and energy companies Ocean Vantage Holdings and Reservoir Link Energy.
Looking forwards, there has been an increase in speculation that Indonesia’s Gojek might move ahead with its long-anticipated IPO in the remaining months of the year. The company dominates food and package delivery in the country – a segment that has seen considerable growth during the pandemic.
As the attention of South-east Asian governments turns from mitigating the worst effects of Covid-19 to combatting unemployment and stimulating growth – key to which will be the injection of liquidity into financial systems – conditions are increasingly favourable for IPOs. Businesses and governments alike have learned valuable lessons during this time.
“The strong government drive towards digital solutions and infrastructure, together with the commitment to increase enforcement of related policies and regulation, are two of the most promising drivers of Indonesia’s economic recovery from Covid-19,” Lamon Rutten, CEO of the Indonesia Commodity and Derivatives Exchange, told OBG.
October is set to be an important test case in the pandemic timeline, and investors from both the region and around the world will be paying close attention.