AsPac IPO scene off to slow start

MANILA, Philippines — Southeast Asia’s initial public offering (IPO) scene was tepid at the early part of 2024 amid concerns on high interest rates and inflationary pressures, a report by Ernst & Young Global Ltd. showed.

According to the EY Global IPO Trends Q1 2024, IPO activity across Southeast Asia was lukewarm, with 38 deals raising $1 billion, down from 51 deals which raised $1.4 billion in the same period last year.

Among the most active exchanges in Southeast Asia during the first quarter were Indonesia with 20 IPOs raising $224 million, Malaysia with IPOs raising $279 million and Thailand with six IPOs raising $273 million.

Meanwhile, EY Global indicated that the Philippines, Singapore and Sri Lanka each saw one IPO on their exchanges during the period.

The report’s first quarter 2024 data covers completed IPOs from January 1 to March 18, 2024, plus expected IPOs by March 31, 2024.

Chan Yew Kiang, EY Asean and Singapore IPO Leader, said the IPO market in Southeast Asia was subdued as high interest rates and inflationary pressures continued to impact the confidence levels of both investors and issuers.

“This challenging economic environment has prompted companies in the region to recalibrate their strategies, placing a heightened emphasis on achieving profitability. As inflationary pressures begin to subside, the anticipated reduction in interest rates is likely to create a more favorable climate for IPOs,” he said.

He said that a strong performance from the global IPO markets will encourage Southeast Asian companies that have been hesitant to go public to re-evaluate their position.

Across Asia-Pacific, IPO activity in the first quarter recorded 119 deals and $5.8 billion in proceeds, 34 percent and 56 percent lower year-on-year, respectively.

“It was a slow start for the IPO scene in Asia Pacific, including the Philippines, in 2024,” SGV Assurance Partner and Philippine EY Private Leader Kristopher Catalan said.

With a generally cautious optimism with the expectation of modest growth in the global economy, Catalan said companies must re-evaluate their readiness to go public given the shifting investor preferences.

He said they must also look into whether they have strong fundamentals and business models to offer to public investors, not just a promise of growth in their prospectuses.

“It is important for IPO-aspirants to be well prepared to get a fair valuation for their companies when the right conditions are in play,” Catalan said.

EY Global IPO Leader George Chan, on his end, said participants in the IPO market are entering uncharted territory as 2024 unfolds.

IPO candidates, he said, are influenced by the recent pivot in investors’ preference toward proven profitability in an altered interest rate landscape and are doing this while facing the intricate dynamics of an intensified geopolitical climate and the buzz around AI.

“To succeed in this shifting environment, IPO prospects must remain flexible and prepared to seize the right moment for their public debuts,” he said.