The future of IPOs in Southeast Asia
Overview of IPOs in Southeast Asia
Initial Public Offerings (IPOs) have been a popular way of fundraising for companies worldwide – however, the scene in Southeast Asia has been less than ideal in recent times.
Due to a changing economic landscape and external headwinds, the funds raised through IPOs in Southeast Asia have decreased.
In this article, we will explore the current state of IPOs in Southeast Asia, and the future outlook of this fundraising option.
Recent trends in IPO funds raised
Recently, IPO funds raised by Southeast Asian companies have been trending downwards due to the ongoing economic headwinds. According to data from Refinitiv, a financial and risk technology research firm, of the 22 IPOs launched in Southeast Asia from January 2020 to June 2020, only 8 could raise more than US$10 million (excluding exceptions). Companies which raised more than $20 million were few and far between.
In addition, the average size of shares offered has also decreased compared to the same period as last year due to investors’ skepticisms towards investing in IPOs. As a result, there has been a decrease in overall number of IPOs launched this year compared to last year. In particular, August has seen no successful IPOs during this period, counting only 2 IPO launches in September, resulting in low turnout numbers from previous years.
Furthermore, with macroeconomic uncertainty still surrounding many countries in Southeast Asia such as Singapore and Thailand due with their GDP declines projected this year, some companies were forced to put halt on their plans for ‘going public’ on the stock market and focus on improving their operations instead. This consequently heightens the possibility of an even deeper downturn for IPO funds raised across the region which already faces difficulties arising from contraction in 2020 economic growth rate outlooks due to Covid-19 pandemic impacts across nations.
Factors driving the decline in IPO activity
The continued economic headwinds and declining business sentiments across Southeast Asia has been a major factor in the recent fall of IPO funds raised by regional companies. On top of this, other factors such as an overall slowdown in the region’s stock markets due to global trade tensions, limited availability of attractive pre-IPO investments and investor concerns about corporate governance have all contributed to the decline.
This lack of capital flows have, in turn, put huge pressure on companies seeking to raise funds via IPOs. As a result, many are postponing or shelving their plans altogether as prospects continue to bleak. Exacerbating matters further is the lack of support from large institutional investors – Private Equity Funds, Venture Capitalists and Mutual Funds etc., who traditionally play a major role in funding start-ups and subsequent company expansion plans. This is proving especially difficult for tech start-ups looking for funding from Venture Capitalists during their early stages of development.
In addition, regional governments have not done enough to create a conducive environment for local companies looking tap the capital markets or entice institutional investors from abroad. These problems are visible across all Southeast Asian countries – Indonesia, Thailand and Singapore, which account for more than half of all IPOs in 2019 within the ASEAN region so far (according to Refinitiv).
IPO funds raised by Southeast Asian companies fall amid economic headwinds
Initial Public Offerings (IPOs) have been the main source of funding for many companies in Southeast Asia. However, the economic headwinds in the region have caused IPO funds raised by Southeast Asian companies to fall.
This article will explore the challenges facing Southeast Asian companies and their prospects in the IPO market.
Southeast Asian companies have raised billions of dollars through initial public offerings (IPOs) in recent years, but this figure is anticipated to drop dramatically due to economic headwinds. The reasons vary, including increasing trade tariffs, currency depreciation, a slowing global economy, and geopolitical risk.
The US-China trade war has significantly impacted Southeast Asian economies as countries such as Singapore, Malaysia, and Thailand export substantial amounts of products to China. As a result, these countries have seen declining export data which has caused their currencies to depreciate significantly since the beginning of the trade dispute in early 2018. Additionally, the US-China sanctions have pressured South Korean exports as key semiconductor components now face constraints in availability on both sides of the Pacific.
The increasingly uncertain global economic outlook has also taken a toll on Southeast Asian countries due to the region’s heavy reliance on outside investment from other nations. In addition, financial access has become more restricted in recent months due to increasing capital outflows from investors worried about a prolonged economic slowdown. This can be seen in Singapore’s stock market which fell 3% between May and December 2019 despite gains elsewhere in Asia during this period.
Overall, these headwinds pose serious challenges for existing and incoming businesses looking to do business or list shares publicly via an IPO in Southeast Asia. In addition, companies are struggling with tight liquidity conditions. At the same time, governments like those of Malaysia and Thailand have sought stability by providing better access to financing through schemes such as increased budget spending or tax cuts. Moving forward, these unresolved issues will continue hampering the growth potential of prospective IPOs coming into the region during 2020/2021 age with trying geopolitics leaving few easy solutions for future investments within Southeast Asia unless new pathways can be found that benefit all participants involved both locally and globally alike; ultimately any progress towards an improved atmosphere will take time while being closely moderated by numerous external factors along the way making potential outcomes quite hard to predict at this difficult juncture for IPOs across Southeast Asia.
The regulatory environment for companies considering an initial public offering (IPO) in Southeast Asia is potentially daunting. Many countries in the region require multiple filings and disclosure requirements, while others have only recently adopted regulations that permit local companies to list overseas. However, local stock exchanges, financial advisers and fund managers can advise on how to structure a listing to meet local regulations and raise capital effectively.
In addition, the economic environment in some Southeast Asian nations has been challenging in recent years. International investors have reacted warily, avoiding riskier investments, leading many companies to reconsider IPOs or postpone them altogether until conditions improve. Economic headwinds affect the amount of funds raised through IPOs: In 2017, Malaysia saw a drop of 67% in new funds raised via IPOs compared with 2016; Singapore dropped 45%. For 2018 and beyond, potential investors will closely watch economic indicators within the region and assess risk accordingly before committing money to any IPO.
Opportunities for Investment
The future of IPOs in Southeast Asia presents unique investment opportunities, even though IPO funds raised by Southeast Asian companies have fallen amid recent economic headwinds. Despite these challenges, there are still many advantages to pursuing IPO investments in Southeast Asia, such as access to emerging markets and the potential to reap rewards from a long-term investment.
This article will explore the key advantages and risks associated with investing in IPOs in Southeast Asia.
Long-term investment opportunities in Southeast Asia
The long-term investment opportunities in Southeast Asia remain appealing to companies and investors alike. Despite the economic headwinds and declining funds raised by Initial Public Offerings (IPOs) in the region, many of these countries offer immense potential for investors to grow their capital over time.
In Southeast Asia, several countries stand out for their investment potential. These include: Singapore, Thailand, Malaysia, Indonesia, Philippines, and Vietnam – providing a range of markets from developed economies to frontier markets. Each country offers distinctive growth opportunities with different risk profiles. For example, mature markets with well-developed regulations like Singapore tend to provide more certainty than those still evolving from market reforms such as Vietnam.
Furthermore, the governments of these countries have taken proactive measures to attract foreign capital with tax incentives for investments made into certain industries as well as improving procedures for setting up operations quickly and efficiently. This has increased international investor’s interest in the region – providing them an additional option outside of traditional investments or focusing on single local stock exposures only available in developed markets. Thus, investors can benefit from this growing region, potentially providing higher returns than elsewhere due to its long-term growth nature.
Overall, the Southeast Asian region is primed for long-term investment given its robust fundamentals and inclusive economic development coupled with an expanding base of businesses ready to access public capital via IPOs at increasingly attractive valuations – despite current short-term economic headwinds having an impact on IPOs raising funds among companies within the region at present day.
Potential for growth in the region
Despite the economic downturn, many Southeast Asian countries are experiencing increasing growth and investment opportunities. The region’s economic landscape has gradually shifted towards developing markets, with increased access to capital, more liberalized regulations and improved corporate governance.
The rise in technology-driven business models in various sectors has directly impacted corporate competition, leading to greater financial transparency and better reporting standards for investors.
As a result of these developments, investment opportunities have opened up across several sectors that offer potential for long-term returns. Sectors such as tourism, healthcare, renewable energy and FinTech have seen increased venture capital activity and public offerings. In addition, initial Public Offerings (IPOs) by Southeast Asian companies have grown steadily over the past few years from developed and emerging markets within the region.
Furthermore, financial institutions have begun to take notice of this trend and are investing increasingly more funds into IPOs led by Southeast Asian companies. Many more IPO funds raised by Southeast Asian companies can be expected this year despite economic headwinds due to strong fundamentals in multiple industries. Investing in early stage startups also present sound risk adjusted opportunities despite higher valuations than mature markets such as US or Europe due to market specific catalysts like availability of new technology platforms or specific regulations applicable only to them.
IPOs of Southeast Asian companies have seen a steep decline in funds raised amid the current economic uncertainty. However, while the current market conditions may not be the most favorable for IPOs, the region still has potential for investors, in the short and long term.
In this article, we delve into the future of IPOs in Southeast Asia, discussing the challenges, opportunities, and prospects for investors.
Summary of key points
Given the recent economic headwinds, this report has discussed key points related to the future of IPOs in Southeast Asia. Primarily, it highlighted that while overall IPO funds raised by Southeast Asian companies have decreased in 2020 due to various challenges, some sectors and markets show resilience.
More specifically, the largest pools of IPO funds raised in 2020 were located in Indonesia (US$ 4.2 billion), Singapore (US$ 4.0 billion) and Malaysia (US$ 1.9 billion). These funds were primarily driven by public offerings from real estate investment trusts (REITs), technology firms and consumer goods businesses. Investors continue to emphasize these sectors despite the pandemic due to their perceived long-term value and earning potential.
Overall, the outlook for IPOs in Southeast Asia remains optimistic despite current headwinds from the global economy. More sophisticated capital markets are emerging which should create healthier investment environments for businesses and support further IPO activity into 2021. Additionally, expected improvements in infrastructure across several Southeast Asian countries is positive news for further growth potential of IPOs moving forward.
Recommendations for investors
Given the current economic headwinds and the challenging global economic landscape, investors must take a vigilant approach when investing in public companies based in Southeast Asia. The difficult environment has been caused by rising financial risks, decreased foreign investment, and trade wars and protectionisms. As such, investors must evaluate potential IPOs carefully and look for sustainable companies with a solid foundation of profitability and long-term potential.
When making initial investments in new IPOs, it is recommended that investors diversify their portfolio globally rather than concentrate all investments in one specific geographic region. Investors should also consider taking an active stance with their investments via thoughtful monitoring of returns that rebalancing based on current market conditions. Additionally, investors should pay special attention to the management team behind each company before investing and their long-term growth strategies. Lastly, investors should review all relevant U.S. Securities & Exchange Commission materials to ensure they understand the associated risk factors with any given sector or company before investing large sums of money into new IPOs. Following these best practices can help investors manage risk while still being able to capitalize on any profitable opportunities within the Southeast Asian IPO market.