KUALA LUMPUR (April 28): New listings on Bursa Malaysia now face an “uphill battle” to sustain buying interests as investors turn increasingly picky amid receding risk appetite, said Mercury Securities.

Poor performance of newly-listed companies in March and April underscores macro conditions as a key demand filter for initial public offering (IPO) as investors retreat from higher-risk and unproven equities during times of uncertainty, the research house said in a note.

“Looking ahead, we continue to expect the IPO activity to remain steady but highly quality-sensitive, driven by the selected investor risk appetite amid increasing uncertain market environment,” the research house said.

Bursa Malaysia has hosted eight IPOs combined on the Main and ACE Markets since March, and all but one flopped on their first day of listing as escalating international trade tensions whiplashed global markets.

Apart from the market turmoil, underwhelming investor demand has also spooked issuers, prompting at least two firms to delay their listing date as they await calmer markets. Even some companies that debuted strongly before March are currently underwater.

That signals “increased investor selectivity, declining speculative appetite, and a pivot toward fundamentals over momentum-driven participation,” Mercury Securities said.

IPO outperformance is now being driven by companies offering clear earnings growth visibility, are in line with macro or policy tailwinds, and operate in defensive sectors while those with thin margins or cyclical revenues are repriced substantially, the research house noted.

Further, the size of market capitalisation has emerged as a “critical differentiator” with larger-cap IPOs not only benefitting from deeper liquidity and stronger institutional interest, but also displaying better post-listing support and resilience, it said.

Still, the IPO sector is expected to remain active, Mercury Securities said, as Bursa Malaysia aims to host 60 listings this year. However, investors will be “highly quality-sensitive,” the research house said.