Asian markets see resurgence of blockbuster IPOs

Blockbuster initial public offerings (IPOs) appear to be resurging in the region ahead of an expected interest rate decrease by the US Federal Reserve and as investor confidence returns as the economy improves.

A blockbuster IPO typically involves a firm whose IPO is eagerly anticipated by investors and the general public, has good valuations and media coverage, and raises a significant amount of capital when it goes public.

The resurgence of blockbuster IPOs is not just a regional phenomenon but a global trend. In the United States, for instance, companies like Instacart and Arm Holdings have recently filed for IPOs, signaling a renewed appetite for new listings in major markets. This global uptick in IPO activity is driven by a combination of factors, including improved market conditions, pent-up demand from companies that delayed their listings during the pandemic, and investors' search for new growth opportunities in a post-pandemic economy.

With risk appetites rising, the market may see more of these IPOs as corporations that delayed listing when interest rates were high seize the opportunity to go public in the coming months. Since 2022, increasing interest rates have stifled investor enthusiasm for riskier investments such as stocks.

Many businesses are seizing the current window of opportunity to move forward with their listings. Mr Yeap Jun Rong, market strategist at trading firm IG, stated that the success of these listings could pave the way for a further resuscitation in the IPO market, as these significant listings are viewed as a test of investors' interest.

The timing of these IPOs is crucial, as companies aim to capitalize on the current market sentiment before any potential economic headwinds. Analysts suggest that the window for successful IPOs may be limited, as geopolitical tensions, inflation concerns, and potential regulatory changes could impact market stability in the coming months. This sense of urgency is driving companies to accelerate their listing plans, creating a bustling IPO pipeline across various sectors.

Midea Group is an example. On September 9, the Chinese home appliance producer launched a share offering in Hong Kong worth approximately HK$26.97 billion (S$4.5 billion), the city's largest listing in more than three years.

The company, which is already listed in Shenzhen, has allocated approximately 492.1 million shares for the Hong Kong offering, with the stock priced between HK$52 and HK$54.80 per share, according to exchange records.

The IPO surpasses that of Calb, a Chinese lithium battery firm that raised US$1.3 billion (S$1.7 billion) in October 2022, and will be the largest in Hong Kong since JD Logistics raised US$3.16 billion in May 2021.

A successful listing by a well-known business like Midea is likely to boost the Hong Kong market, which has generated only US$2.5 billion in IPO funds this year, compared to US$22.1 billion raised during the same period in 2021, before the Fed raised rates.

The success of Midea's IPO could have far-reaching implications for the Hong Kong market and the broader Asian financial landscape. A strong performance could not only attract more mainland Chinese companies to consider Hong Kong listings but also potentially lure international firms looking to tap into Asian capital markets. This could help reinvigorate Hong Kong's position as a global financial hub, which has faced challenges in recent years due to political uncertainties and increased competition from other financial centers in the region.

On September 9, Malaysia's largest convenience store chain, 99 Speed Mart Retail Holdings, debuted on the country's stock exchange following an IPO that was more than three times subscribed. It collected RM2.36 billion (S$705 million), Malaysia's highest IPO in seven years.

Mr Rick Chan, Singapore managing partner at professional services firm Forvis Mazars, stated that Midea and 99 Speed Mart are well-known retail brands that chose to list in their home countries "largely due to the higher liquidity and valuation that similar companies traditionally received in Hong Kong and Malaysia in recent years".

"This shows that companies with the right elements can still raise IPO money at good valuations if they choose the right stock exchange," according to him.

"Investors in their respective regions are already aware of these names. Matching these IPO ventures with the most appropriate stock exchange increases the chances of success for both."

The success of these regional IPOs highlights a growing trend of companies preferring to list in their home markets or in nearby financial hubs. This shift is partly driven by increased scrutiny of foreign listings in some major markets, as well as a desire to tap into local investor bases that are more familiar with the brands. For investors, these IPOs offer an opportunity to gain exposure to fast-growing Asian companies that are well-positioned to benefit from the region's economic growth and rising consumer spending power.

Despite only two minor IPOs this year, efforts are on to bring more listings to the Singapore Exchange (SGX).

Last week, the SGX sponsored a discussion between Deputy Prime Minister and Monetary Authority of Singapore (MAS) Chairman Gan Kim Yong and representatives from venture capital firms and their portfolio companies. It was the first of a series of events aimed at bringing Singapore stakeholders together to discuss how to expedite the IPO process and resuscitate the local stock market.

"The initiative is part of SGX's ongoing engagement efforts with market stakeholders to explore various channels to enhance and build a dynamic equities market," according to a post on LinkedIn. The measure also builds on similar efforts by a review group established by MAS on August 2.