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According to a Deloitte report, Southeast Asia’s IPO market is set to contract significantly in the first half of 2024, with market capitalization falling 71% to $5.8 billion.
The region saw just 67 initial public offerings in the first half of the year, down 21.2% from the same period in 2018. These IPOs raised $1.4 billion, down 53.3% from a year ago.
According to Deloitte, there were no blockbuster IPOs between January and June, and only one blockbuster IPO with a market cap above $1 billion and raising more than $200 million, compared with three blockbuster IPOs that raised more than $600 million during the same period a year ago.
This marks a continuing downward trend that began in the second half of 2022, according to Deloitte data.
Deloitte said the downward trend “suggests subdued sentiment in the IPO market as investors and IPO candidates continue to look to macroeconomic factors.”
Still, the report noted that historically, the second half of the year has always been the better performing half between 2020 and 2022.
We expect to see a big wave of AI IPOs hit the IPO capital market in the coming years, bringing innovation and new opportunities to the market.
Tei Hui Lin
Deloitte
“Despite favorable growth prospects and increasing foreign direct investment in Southeast Asia, prolonged geopolitical instability and a high interest rate environment are key factors affecting market conditions and investor sentiment in the region,” said Tey Hui Lin, Deloitte’s Southeast Asia accounting and reporting assurance leader.
Deloitte analysts warned that high interest rates could remain in place into 2024 as the government tackles inflation concerns.
Against this backdrop, investors focused on “demonstrated profitability and sustainable cash flows” rather than the pursuit of growth at all costs business model that many companies adopted in 2020-2022.
Indonesia in particular saw the most dramatic decline among Southeast Asian countries.
“Indonesia topped the list for 2023. [Southeast Asia] “The IPO chart experienced a significant decline in the first half of 2024 as investors and IPO aspirants adopted a wait-and-see stance ahead of the February 2024 presidential elections and expectations of new economic policies,” Deloitte analysts said.
The market capitalization of Indonesian listed companies fell 92.2% from January to June to $1.22 billion, while IPO proceeds fell 89.1% year-on-year to $248 million. The number of Indonesian listed companies in the first half of this year fell 43.2% to 25 from 44 in the same period last year.
“The Southeast Asian IPO market may be sluggish in 2024, but there is cautious optimism that things will improve from 2024 onwards,” Mr Tay said.
Tay said interest rates are expected to fall in the coming years, which could encourage a revival of REITs. [real estate investment trusts] Meanwhile, with many AI companies still in their early stages, we may see more artificial intelligence-related IPOs hitting the market in the near future.
“We expect to see a big wave of AI IPOs in the IPO capital market in the next few years, bringing innovation and new opportunities to the market,” Tay said.
