IPO funds raised by Southeast Asian companies fall amid economic headwinds

The funds raised by public listings in Southeast Asia fell by 52% this year compared to a year ago, data from Deloitte showed.

Initial public offering (IPO) funds raised by companies in the region reached $6.3 billion from the January to Nov. 11 period, the management consulting company said. That's significantly lower than the $13.3 billion that was raised in all of 2021.

The number of listings in 2022 also fell – from 152 in 2021 to 136 year-to-date, the data showed.

The report looked at six countries, namely, Singapore, Indonesia, Thailand, Vietnam, the Philippines and Malaysia.

The findings also revealed that only eight large and medium-sized companies listed in 2022, less than half of the 19 large- and medium-sized companies that were listed in 2021.

Large companies are defined as those with market capitalization of above $1 billion, while medium-sized firms are those with a market cap of between $500 million to $1 billion.

IPO activity in Southeast Asia was lower this year, with only two blockbuster IPOs — Indonesia's GoTo which raised $1.1 billion and Thai Life Insurance with $1 billion raised.

This could mean that the bigger companies are holding out and postponing their listings in anticipation of better market conditions, Deloitte said.

Last year, there was the $1.5 billion IPO of Indonesian e-commerce company Bukalapak in August, as well as three giant IPOs in Thailand.

Thailand's state oil conglomerate's retail arm, PTT Oil and Retail Business (PTTOR) raised $1.6 billion in February, microfinance company Ngern Tid Lor raised $1.4 billion in May, while entertainment media content producer and distributor The One Enterprise raised $118 million in November.

Macroeconomic headwinds such as rising global inflation rates and interest rates have slowed the momentum seen in 2021.

"Before the COVID-19 pandemic, the IPO activity moves in tandem with the economy and GDP growth. However, it has been the reverse in the last two years," Tay Hwee Ling, disruptive events advisory leader, Deloitte Southeast Asia and Singapore said at a media conference Tuesday.

She added that this is happening despite countries reopening their borders.

By deal count, Indonesia led the region with 54 companies listing on the Indonesia Stock Exchange from January to the second week of November. Malaysia ranks second with 31 IPOs, followed by Thailand at 28 IPOs.

Indonesia's GoTo, the merged entity of Gojek and Tokopedia, raised $1.1 billion in its April IPO which was marked as the third-largest IPO in Asia and fifth-largest globally this year. GoTo's IPO alone amounted to 47% of total funds raised on the Indonesian stock market, according to CNBC's calculations based on Deloitte figures.

By amount raised, Thailand topped the table, accounting for 39% of the amount raised from 28 offerings in Southeast Asia at $2.5 billion, fueled by the listings of Thai Life Insurance at $1 billion raised and meat manufacturer Betagro Public Company Limited at $555 million raised. Indonesia was second place with $2.3 billion raised, followed by Malaysia's $681 million.

Thailand and Indonesia contributed to 75% of total funds raised across Southeast Asia.

The Malaysian IPO market raised $681 million so far this year, compared to $337 million in all of 2021. On the other hand, other markets — Singapore, the Philippines and Vietnam — saw both deal count and funds raised falling.

In 2022, tech valuations and deal volumes shrank across most investment stages due to unpredictable market conditions such as rising interest rates, according to a report by analytics platform CB Insights. Investors, who became more cautious, invested in fewer and smaller deals.

While challenges are ahead, "Southeast Asia has a high proportion of young people, and in most locations, active retail investors, which means that the economy and businesses will grow," said Tay.

More than half the population of Southeast Asia is under 30, according to International Monetary Fund. Young people could potentially propel the economy moving forward.

On the outlook for the remaining year through to 2023, Tay said Deloitte is "cautiously optimistic."

"There is still room for high growth in Southeast Asia, as the region emerges from the Covid-19 crisis. We expect IPO activity to go through cyclical highs and lows, as the market re-calibrates from the pandemic mindset to 'regular programming.'"

While valuations may be generally lower for tech companies now, she added, those with solid business fundamentals and the ability to prove profitability "will still be able to achieve optimal market valuation and benefit from the capital markets."