Indonesia set for record fundraising in 2023; large IPOs still expected in S-E Asia in H2

INDONESIA could deliver a record in initial public offering (IPO) proceeds this year, analysts said. It is already the top new listings destination among South-east Asia’s six largest markets, accounting for more than half of the IPOs and proceeds raised in the first half of this year.

The country is speeding ahead even as the rest of the region experiences a slowdown in listings, as high interest rates and a weak macroeconomic outlook dampen investors’ risk appetites.

There were 85 IPOs across Indonesia, Thailand, Malaysia, Singapore, the Philippines and Vietnam in the first half of the year, raising US$3.3 billion, according to a Deloitte report.

This was more than the 73 IPOs in H1 2022, which raised US$3.1 billion. It was a slight dip from H2 2022, however, when 90 IPOs raised US$4.5 billion.

Deloitte noted that the year-on-year strength was largely due to three sizeable IPOs in Indonesia that raised more than US$500 million each, versus just one blockbuster IPO a year earlier.

Of the 85 listings, 44 were from Indonesia. These Indonesian listings raised US$2.3 billion, and analysts believe the market could potentially beat the record US$4.4 billion in IPO proceeds raised in 2021.

Indonesia has benefited from a bumper crop of resources-related listings this year. These include nickel companies Trimegah Bangun Persada (Harita Nickel) and Merdeka Battery Materials, which each raised more than US$600 million.

Rounding out the top three was Pertamina Geothermal Energy, which raised US$604 million.

The growing importance of environmental, social and governance factors in investing has been an important driver, said Art Anuruk Karoonyavanich, Singapore capital markets head at DBS. Renewable energy and electric vehicle-related plays have been well received.

After Indonesia, the two best performing markets were Thailand and Malaysia.

Thailand saw 18 IPOs raise US$517 million – a slower start compared with the first half of 2022. Malaysia had 16 IPOs that raised US$369 million in the first half.

Tham Tuck Seng, capital markets leader at PwC Singapore, said South-east Asia’s IPO markets have been robust post-pandemic.

“Key contributing factors include the region’s fast-expanding middle-class population, which has fuelled impressive consumption growth, and regional emerging economies benefiting from companies shifting operations from China to this region,” he said.

He noted that Indonesia has overtaken Hong Kong, which has consistently been one of the top global IPO markets.

“We should continue to see sizeable IPOs in Indonesia from the consumer and commodities sectors,” he said, adding that Indonesia may also continue with the privatisation of its state-owned companies via IPOs when interest-rate hikes and global recession fears subside.

The momentum for Indonesia has continued in the second half, with more than US$700 million raised in Amman Mineral’s July IPO, the biggest of the year so far.

Across the region, Tham noted that there may still be a few “bright sparks” which could help the IPO market improve towards the end of 2023.

“There is a backlog of IPO-ready companies waiting to go public. Meanwhile, investors’ confidence may return with corporate earnings recovery and the eventual stabilisation of the debt market,” he said.

DBS, too, sees a few more large IPOs in the pipeline for Indonesia and Thailand, even though headwinds from uncertain interest rates and persistent inflation will continue to play on investors’ minds.

“We expect investors to take a cautious approach but... remain on the lookout for value and the right opportunities,” Karoonyavanich said.

In Singapore, IPO activity was muted in the first half. Three listings took place on the junior Catalist board, raising a total of S$27.9 million in proceeds.

This was less than the nine listings that raised S$571.8 million in proceeds in H1 2022, of which three were special purpose acquisition companies (Spacs) that listed on the Singapore Exchange (SGX) mainboard.

Tham noted that Singapore does not have a large domestic market, unlike Indonesia or Thailand, and many of the listed companies on the SGX have significant overseas operations.

“The global uncertainties have significantly reduced the number of potential foreign issuers seeking listings in Singapore,” he noted.

He nevertheless believes the current capital market reset – of investors placing emphasis on fundamentals – may suit potential local IPO aspirants that have stable, profitable growth and seek regional outreach.

He added that market expectations are for the three Spac sponsors to eventually identify viable targets for acquisition.

“However, the life-cycle of these Spacs may likely be extended for another 12 months to allow the Spac sponsors time to evaluate the target’s business, financial and operating conditions,” he said.

Deloitte noted a continued absence of real estate investment trust (Reit) listings on the SGX amid the current rising rates environment. The last Reit listing on the SGX was Digital Core’s IPO in December 2021.

“Reit aspirants would have to factor in increased borrowing costs, which might postpone listing plans. We expect the Reit trend to come back once interest rates stabilise,” it said.

For the broader region, Deloitte noted that investors are still waiting for more certainty around interest rates, inflation and the global geopolitical environment.

It nevertheless expects IPOs in several industries across South-east Asia, including logistics, technology, mining, electric vehicles and renewable energy.