IPO appetite resilient in Malaysia despite lockdown measures — Deloitte Malaysia

IPO appetite resilient in Malaysia despite lockdown measures — Deloitte Malaysia
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KUALA LUMPUR (Nov 26): The appetite for initial public offerings (IPOs) remains positive in Malaysia despite the ongoing pandemic and temporary restriction on movements in the country, said Deloitte Malaysia.

Although the enforcement of the movement control order (MCO) in March put a halt to IPO activity over the course of the first three months of movement restrictions, momentum has picked up after that, with more companies showing interest to list, noted Wong Kar Choon, disruptive events advisory leader at Deloitte Malaysia.

“Just after the MCO was lifted (after May), there were a lot of enquiries on IPO by companies interested to do a listing exercise. It’s quite unprecedented considering that we’re in a pandemic and businesses are not doing well,” Wong said during a virtual Deloitte Media Conference: SEA 2020 IPO Market Performance & Outlook.

During the first quarter of the year prior to the MCO enforcement, there were seven IPO listings on Bursa Malaysia. From June onwards, there were 11 more listings including that of Mr DIY Group (M) Bhd, which is Malaysia’s biggest listing in the last three years, raising US$362 million.

With a total of 18 listings as of October, this is obviously lower than the record 30 listings on Bursa Malaysia last year.

Still, Wong noted that despite the fewer listings, the amount of funds raised was slightly higher at US$481 million compared to US$447 million in 2019. The market capitalisation of the 18 companies listed this year has also leaped to US$2.88 billion, compared to US$1.95 billion in 2019, thanks to Mr DIY’s IPO, which gave it a US$2.4 billion market capitalisation upon listing.

“So while the pandemic and the MCO had partly affected the IPO appetite in Malaysia, the listing of Mr DIY and the other companies listed subsequent to the MCO show certain types of companies will continue to enjoy market participation,” said Wong.

He pointed out that in fact, the pandemic and MCO have created some positive elements in the capital market including a lot more retail participation during the lockdown as more people remained at home and engaged in online webinars and market trading. The government’s economic incentives during this period have also provided opportunities to people where they had access to more funds to do trading.

Furthermore, the low interest rates for fixed deposits and savings have also created an awareness among people to seek alternative and better-yielding investment. That resulted in a lot more participation in the trading of the stock market, he said.

“The average trading volume has increased by approximately 86% and 208% for 2Q and 3Q 2020 as compared to the same quarter in 2019. The high trading volume with buying momentum should remain strong where investors are generally looking at stock specific rather than sectors, especially those related to technology and healthcare,” he added.

Lam Jian Wyn