KUALA LUMPUR (July 9): Southeast Asia's initial public offering (IPO) market saw a steep decline in the first half of 2024 (1H2024), according to a recent report by Deloitte.

Deloitte said the number of IPOs fell to 67, down 21.2% from last year, while funds raised from IPOs plummeted by 53.3% to US$1.40 billion (RM6.60 billion) and market capitalisation dropped by 71% to US$5.80 billion.

Deloitte saw no blockbuster IPOs from January to June 2024. 

Only one large IPO had a market cap over US$1 billion and raised more than US$200 million. In contrast, the same period in 2023 saw three large IPOs each raising over US$600 million.

This decline continued a trend seen since mid-2022, highlighting "subdued IPO market sentiments".

"Historically, the second half of each year has always been the better performing half (between 2020 and 2022). However, there has been a downward trend between 1H2023 and 1H2024, signalling subdued IPO market sentiments, where investors and IPO candidates continued to navigate macroeconomic factors, such as the global geopolitical climate, a high-interest-rate environment and reduced liquidity," said Deloitte. 

Tay Hwee Ling, Deloitte’s Southeast Asia accounting and reporting assurance leader, stated, "Despite a positive growth outlook and increasing foreign direct investment in Southeast Asia, the prolonged geopolitical instability and high-interest-rate environment have been the significant factors affecting the market conditions and investor sentiments in Southeast Asia."

Deloitte analysts warned that high interest rates might persist in 2024, as governments continue to combat inflation.

In this environment, investors are focusing on "proven profitability and sustainable cash flows", rather than growth-at-all-costs models seen from 2020 to 2022.

Tay expressed cautious optimism, saying, "While Southeast Asia’s IPO market may appear subdued in 2024, there is cautious optimism that conditions will improve beyond 2024."

He anticipates that lower interest rates could revive real estate investment trust listings, and that artificial intelligence (AI)-related IPOs might soon emerge, as many AI firms are still in early development stages.

“We anticipate a significant wave of AI IPOs tapping on the IPO capital market in the coming years, bringing innovation and new opportunities to the market,” Tay said.

Deloitte said Malaysia's IPO capital market leads Southeast Asia in total IPO funds raised, although new listings were primarily smaller in size, with significant activity on the ACE Market.

Key listings included Alpha IVF Group Bhd (KL:ALPHA), specialising in fertility care in Malaysia and Singapore, and Prolintas Infra Business Trust (KL:PLINTAS), the first Islamic business trust IPO on Bursa Malaysia since 2012.

Deloitte said the investment focus remains on the government's policies to attract foreign investments and boost renewable energy, aligning with the New Industrial Master Plan and National Energy Transition Roadmap.

The firm also noted the key incentives and fast-track processes that may have invigorated Malaysian IPOs.

From March 1, the Securities Commission Malaysia (SC) and Bursa have implemented an expedited three-month approval period for IPOs on the Main Market and the ACE Market, contingent on timely responses from principal advisers/sponsors.

Effective Jan 1, the SC has also introduced an accelerated transfer process for promoting sizeable, qualified ACE Market companies to the Main Market, requiring, among other criteria, a daily market capitalisation of at least RM1 billion for the past six months. 

Additionally, from 2023 to 2025, eligible technology-based companies listing on the Main Market, ACE Market, or LEAP Market can claim up to RM1.5 million in tax deductions for various listing costs, including fees to authorities, professional fees, and underwriting expenses.