Booming Jakarta IPO market leaves major global venues behind
INDONESIA is proving to be a treasure trove of initial public offerings (IPOs) amid an extended global lull, beating some other major listing venues in total funds raised during the first quarter. And bankers say there will be more to come.
The South-east Asian market recorded US$1.45 billion in IPO proceeds between January and March, its highest first-quarter tally and nearly twice the amount raised in Hong Kong. Indonesia’s total also exceeded that of Tokyo and London, and at least two more offerings larger than US$500 million each are expected to price in early April. IPO proceeds are down more than 60 per cent year-on-year globally and for Asia-Pacific.
Jakarta has benefited from listings of state-owned enterprises in a bid to reduce their reliance on the federal budget. A drive by South-east Asia’s largest economy to integrate itself into the global electric vehicle supply chain is also prompting firms to take advantage of high investor interest in the sector. That said, demand for local offerings will be tested as Chinese tech behemoths led by Alibaba Group Holding prepare to list their units in Hong Kong.
“Indonesia remains a focus market, and we want to do more” deals there, said Sunil Khaitan, head of equity capital markets for South-east Asia at Bank of America in Singapore. The bank is working on about five more debuts within the next two to three quarters, he said.
Among the widely expected deals that are coming to market include Pertamina Hulu Energi, a unit of state-owned oil behemoth Pertamina, and palm oil grower Palm Co, which is a subsidiary of Perkebunan Nusantara III. PT Pertamina also offered shares in Pertamina Geothermal Energy earlier to raise US$604 million in what was one of the world’s biggest deals this year.
One of the sectors capturing investors’ attention is the EV-battery space. Indonesia’s large reserves of nickel – a key component in batteries for EVs – have drawn carmakers including Hyundai Motor and Mitsubishi Motors to set up local plants to ensure continued supply as the nation bans ore exports.
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Interest in the nickel industry, which sits at the heart of President Joko Widodo’s vision of developing an end-to-end EV supply chain onshore, has helped producers get top dollar for their IPOs. Metal and mining firm Trimegah Bangun Persada raised US$659 million in March in what was Indonesia’s largest offering in over a year. The company, also known as Harita Nickel, had the first EV-related IPO in Jakarta.
Meanwhile, another producer Merdeka Battery Materials is taking orders until Apr 4 for an offering as large as US$637 million. It is slated to debut on Apr 18.
“The EV theme remains strong, I think it’s one of the bright spots for equity capital markets at the moment,” said Udhay Furtado, co-head of ECM, Asia-Pacific at Citigroup. “We expect several large Indonesian IPOs coming to market from that sector.”
While the IPO scene in Indonesia is promising, the market could soon fall behind Hong Kong, which looks set to get a boost from some sizable deals.
Cainiao Network Technology, the logistics arm of Alibaba Group Holding, has started preparations with banks for a Hong Kong offering, Bloomberg News reported last week. Two units of JD.com also filed for IPOs last week.
Weakness in Indonesia’s secondary market is another concern. The benchmark Jakarta Composite Index is down 0.7 per cent this year, trailing the broader Asian gauge, after being one of the world’s top performers in 2022. Pertamina Geothermal’s slide of more than 20 per cent since its debut in late February has been uninspiring.
Given the current volatile market conditions, investors “may adjust their risk appetite accordingly”, said Gioshia Ralie, senior country officer for JPMorgan Chase in Indonesia.
That said, companies are still seen continuing with their preparations for IPOs, and bankers expect a flow of mid-to-large size offerings throughout the year as foreign investors hunt for new markets and themes.
“We’re definitely seeing new investors who have never looked at South-east Asia, never looked at Indonesia before, come out and say: ‘Okay, we want to play this’,” said Bank of America’s Khaitan. Offerings should “attract a lot more international participation”. BLOOMBERG
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