Capital markets across Southeast Asia stayed resilient in 2020 despite a host of uncertainties from the evolving global health crisis to the worsening US-China trade tensions and the impact of the US presidential elections. Total IPO activity in the region for 10.5 months this year bucked the overall downward trend to inch up to pre-COVID levels with total funds raised of US$6.44 billion from 100 initial public offerings (IPOs).
Although the number of IPOs decreased by 38% from 161 IPOs in full year 2019 and the total IPO proceeds decreased by 12% from US$7.34 billion, the total IPO market capitalisation in 2020 increased by 3% to US$25.96 billion. The good news is capital markets in Southeast Asia appear to be navigating global economic headwinds well thus far.
For the second consecutive year, Thailand remains in pole position for the highest funds raised across Southeast Asia. Taking the top two spots on the region’s leaderboard this year are Thailand’s Central Retail Corporation Public Company Limited and SCG Packaging Public Company Limited with US$1.77 billion and US$ 1.27 billion funds raised respectively. The two listings collectively accounted for almost half of the total funds raised in Southeast Asia. A stable economic growth, strong currency, low interest rates and consistently strong domestic liquidity have allowed the Stock Exchange of Thailand to net US$3.94 billion in IPO proceeds as of 15 November 2020, which accounted for 61% of total funds in 2020 to emerge as one of the bright spots in the region. This marks the fourth consecutive year that Thailand has raised more than US$2 billion from IPO listings and the first time since 2015 to break the US$3 billion mark.
“Thailand’s IPO market continues to show its growth potential as one of the stronger IPO markets in Southeast Asia. Largely driven by home-grown companies and fuelled by increasing investor interests in firms focused on consumer businesses, it continues to appeal strongly to investors and fund managers,” said Ms Wilasinee KRISHNAMRA, Disruptive Events Advisory Leader, Deloitte Thailand.
Across the border, Bursa Malaysia scored the biggest boost from the listing of Mr D.I.Y. Group (M) Berhad which raised US$362 million, making it the largest listing in three years, while new listings fell to 18 this year, as compared to 30 listings in 2019. Overall, Bursa Malaysia mustered a total fund raising of US$481 million for 2020, registering growth from US$447 million raised in 2019. Mr WONG Kar Choon, Disruptive Events Advisory Leader, Deloitte Malaysia commented, “The average trading volume has increased by approximately 86% and 208% for Q2 and Q3 2020 as compared to the same quarter in 2019. The high trading volume with buying momentum should remain strong where investors are generally looking at stock specific rather than sectors, especially those related to technology and healthcare.”
In the Philippines, the landmark listing of AREIT, Inc. marked the country’s first-ever REIT listing, lifting the bourse with a US$255 million IPO in August. The IPO contributed to 31% of the total funds raised by the Philippine Stock Exchange, in addition to the 65% of funds contributed by Converge Information and Communications Technology Solutions Inc, which raised US$523 million.
Indonesia was responsible for 46 IPOs in the first 10.5 months of 2020, which accounted for the highest number of IPOs across Southeast Asia in 2020. The high IPO activity can be attributed to the easing of listing for small and medium-sized enterprises since 2017.
Singapore saw its largest home-grown listing through Nanofilm Technologies International Limited (Nanofilm Technologies), which raised US$345 million on the SGX Mainboard, a platform typically dominated by REITs listings in recent years.
As at 15 November 2020, the Singapore Exchange (SGX) raised a total of US$852 million in IPO proceeds from 8 IPO deals. In addition to Nanofilm Technologies, this includes two REIT IPOs on SGX Mainboard with US$479 million funds raised and five deals on the Catalist board that raised US$29 million. In comparison, the exchange raised US$2.26 billion in proceeds from 11 IPO deals in 2019.
Ms TAY Hwee Ling, Disruptive Events Advisory Leader, Deloitte Southeast Asia and Singapore on how the pandemic has impacted the capital markets: “In a time of crisis, companies can find new growth by making fundamental changes to their business model. Sectors like healthcare and its suppliers have benefitted from the COVID-19 pandemic. Investors have also responded to the crisis and are adapting to the next normal – we have seen a significant increase in trading activities as the pandemic unfolded during the lockdowns. The use of technology for virtual IPO roadshows have allowed companies to break down barriers, gaining access to a wider pool of investors.”
For some countries, REITs continue to remain an attractive asset class with low volatility, above-market dividend yields and provide exposure to high-quality properties, healthcare facilities, e-commerce or digitalisation related assets. The growth potential for REITs across Southeast Asia region is promising, given the region’s population and urbanisation-led growth trends.
On the outlook for 2021, Ms TAY Hwee Ling, Disruptive Events Advisory Leader, Deloitte Southeast Asia and Singapore believes the region will continue to see good growth and expects an upswing in listings as a soon as a vaccine is proven safe and effective. “COVID has made companies reevaluate their business and growth forecast; and companies are looking into windows of opportunity to raise funds from stock markets to support their growth and stay resilient in this challenging climate. Although we are not out of the woods yet, the listing markets in Southeast Asia are still dynamic and attractive to investors.”