Zero IPO so far but Bursa unfazed

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PETALING JAYA: A telling sign of the deepening financial crisis that has rattled the global equity markets is the absence of initial public offerings (IPO) on Bursa Malaysia Securities in the first two months this year.During the corresponding period in 2008, there were six and a total of 23 throughout the year. In 2007, there were 26 IPOs. Since 2000, the lowest number of IPOs was in 2001 with 20 and the highest in 2005 with 79.According to the Securities Commission’s (SC) final quarterly scorecard for last year, a total of 31 IPO applications were approved in 2008, of which 10 were listed. The remaining 21 are, as the SC said, timing their listings to take into account the current uncertain market environment after receiving time extension from the regulator.All is not doom and gloom though, as investment banking sources say there are at least four companies from China that have strongly expressed interest to list in Malaysia, indicating that there is still some attraction in the local equity market.“They would be submitting their applications to the SC pretty soon,” said one source, declining to provide details of the nature of these companies’ businesses.But how is the stock exchange operator, Bursa Malaysia Bhd viewing this trend?In an email reply to The Edge Financial Daily, its chief executive officer Datuk Yusli Mohamed Yusof said the lack of listings now was not peculiar to the local market but all markets impacted by the global financial meltdown.“However, we noted the continued interest from prospective companies judging from the 31 new IPO applications for 2008, of which 21 have not yet listed, are possibly timing their listings according to stable market conditions.”“I expect most of these companies wanting to list are waiting for clearer signals of global economic stability, specifically from the effects of the stimulus packages rolled out in the US,” he said.Yusli said the decrease in listings had minimal impact on Bursa’s overall financial performance as revenue from initial listing fees in 2008 contributed only 0.6% of the company’s total revenue. “While we have seen a significant drop in profits derived from the equities market in 2008, it still remains the sector which generates the most revenue for the company.  The drop is largely attributed to the decrease in trading revenue for the equities market,” he said.Yusli said there were other incomes that were stable in nature, specifically information services, broker services and participants’ fees. He said Bursa’s derivatives market would continue to be its driver for growth for the next three to four years due to sustained interest in this area, adding that this market had been fairly stable following the global downturn.“In fact, volume of the crude palm oil futures (FCPO) contract has remained steady despite the market uncertainties and this indicates a sustainable growth for the coming years.“Last year showed a marginal improvement in the growth of the FCPO contracts in which a total of three million contracts were traded in 2008 compared to 2.8 million in 2007. Very recently in February (2009), there were about 261,615 contracts traded in comparison to 200,211 contracts in February 2008,” he said.This article appeared in The Edge Financial Daily, March 10, 2009.