Malaysia’s IPO Capital Market
2021 mid-year report
Despite COVID-19’s negative impact on our economy, in 2020 Malaysia saw a record number of IPOs, and that trend carried on to the first half of 2021. Wong Kar Choon, IPO Leader of Deloitte Malaysia shares his optimistic view on the key factors contributing to the vibrant capital market and what to expect moving forward.
The first half results
Back when the COVID-19 pandemic started in Malaysia in March 2020, who could have imagined that after almost 18 months, the pandemic has yet to subside. I was hopeful that by now, things would have returned to normal. How wrong I was, as many businesses had since closed down and countless livelihoods affected.
However, behind all distressing news, there is a silver lining – certain businesses are doing exceptionally well. For these fortunate organisations, the logical next step would be to expand and increase their organisation’s capacity. This has led to numerous organisations seeking equity funding through capital market and initial public offerings. In 2020, Malaysia saw a record number of IPOs, and that trend carried on to the first half of 2021.
In the first six months of 2021, Malaysia recorded 14 listings, raising approximately RM395 million with a market capitalisation of RM1.5 billion. Of the 14 listings, two were main listings, seven in the ACE market, and five in the leap market. One in particular, OM Holdings Berhad stood out as a dual listed company with Bursa Malaysia and Australian Stock Exchange. Notably, the first half of 2021 was impressive in comparison to 2020 which only saw 7 listings.
Malaysia is not the only Southeast Asia (“SEA”) capital market that is doing well. Across the region, we continue to see an increase in capital market activities. Overall, SEA capital market had 59 IPOs in the first six months, raising a combined total of USD5.97 billion. The top performing country and darling is still Thailand, having raised approximately
USD3.3 billion in the first half of 2021 – contributing to approximately 55% of the capital raised in SEA.
Optimism in 2021?
One may wonder, why there is such optimism in the capital market in Malaysia and the SEA region. Here are a few key factors contributing to the vibrant capital markets:
1. 2021 is the year where most countries, including Malaysia will receive their vaccination. This provides a sense of optimism that economic recovery is on the way in both a local and global context. This positive note will continue to encourage businesses to tap into the capital market.
2. Companies that are doing well will continue to increase its presence and capacity despite the pandemic.
3. Receiving continued support from retail investors. Although the average trading volumes has decreased from a high peak in 2020, the average daily trading volume (ADTV) is hoping to pick up towards the tail end of 2021 as vaccination rate increases for most countries and businesses reopen.
There is no denying that certain businesses flourished and have been doing well in this trying time. To seize the opportunities, technology-based start-up companies are also seeking a different type of fund raising. Over the last couple of months, we have heard an increasing buzz on Special Purpose Acquisition Company (SPAC). There were also announcements made on a number of SEA technology-based start-ups, seeking a SPAC merger in the capital market in the United States. Why is that so? One key reason is because SPACs is seen as a faster alternative in raising capital than the traditional IPOs. Another is the sum of funds available especially in the US capital market. Based on the data by Spacktrack.net, the current SPAC trust funds available in the US that are still searching for a viable business merger is approximately USD114 billion. That is a lot needed to find a viable business within 24 months from a SPAC IPO.
Although there has been a bit more talk of SPAC recently, it is not a new term in the Malaysia capital market. The Malaysia market has its first SPAC in 2011 with the listing of Hibiscus Petroleum. With enthusiasm into SPAC, we may also see a renewed interest in SPAC listing in the Malaysian capital market.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited
(“DTTL”), its global network of member firms, and their related entities. DTTL
(also referred to as “Deloitte Global”) and each of its member firms and their
affiliated entities are legally separate and independent entities. DTTL does not
provide services to clients. Please see www.deloitte.com/about to learn more.
Deloitte Asia Pacific Limited is a company limited by guarantee and a
member firm of DTTL. Members of Deloitte Asia Pacific Limited and their related
entities, each of which are separate and independent legal entities, provide
services from more than 100 cities across the region, including Auckland,
Bangkok, Beijing, Hanoi, Hong Kong, Jakarta, Kuala Lumpur, Manila, Melbourne,
Osaka, Shanghai, Singapore, Sydney, Taipei and Tokyo.
This communication contains general information only, and none of
Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms
or their related entities (collectively, the “Deloitte organisation”) is, by
means of this communication, rendering professional advice or services. Before
making any decision or taking any action that may affect your finances or your
business, you should consult a qualified professional adviser.
No representations, warranties or undertakings (express or implied) are
given as to the accuracy or completeness of the information in this
communication, and none of DTTL, its member firms, related entities, employees
or agents shall be liable or responsible for any loss or damage whatsoever
arising directly or indirectly in connection with any person relying on this
communication. DTTL and each of its member firms, and their related entities,
are legally separate and independent entities.
© 2021 Deloitte PLT