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Nikkei Markets

Malaysia's IPO market likely to rev up from July

Smooth power transfer after shock poll outcome to calm investors, spur issues

The Securities Commission of Malaysia expects companies to raise about 8 billion ringgit through initial public offerings this year.   © Reuters

KUALA LUMPUR (Nikkei Markets) -- Initial public offerings in Malaysia will likely pick up pace from the second half of this year as political uncertainties ease with smooth transition of power that helped calm investors following a shock election outcome in a steadily expanding economy, bankers said.

Issuers have stayed on the side lines ahead of Malaysia's May 9 national election and there would be a significant number of backlog IPOs going to the market in the second half of 2018 and in 2019, said Maybank Kim Eng Regional Head of Equity Capital Markets Ramesh Manimekalanandan.

"Given the IPO pipeline, it is possible that the total value in 2018 exceed the amount raised in 2017," Manimekalanandan said. "Maybank Investment Bank currently has a strong pipeline of deals."

Among the companies eyeing IPO this year, Johor Corp is planning to list its quick-service restaurant business by November in a deal that could raise as much as 2 billion ringgit. Semiconductor firm MI Equipment Holdings is set to launch IPO prospectus next month to raise about 200 million ringgit.

So far this year, Malaysian companies have raised under 250 million ringgit ($63.26 million) through IPOs. The Securities Commission expects companies to raise about 8 billion ringgit through initial public offerings this year.

The fund raising efforts are dwarfed by similar initiatives at Hong Kong - a regional capital magnate - which saw 75 IPOs raising $4.37 billion year-to-date, while in neighbor Singapore six initial share sales raised $404 million, according to data from Dealogic.

Many market participants expect fundraising in Hong Kong's IPO market to be the largest in the world in 2018. Global consulting company PricewaterhouseCoopers expects 150 companies to list in Hong Kong during 2018, raising between HK$200 billion ($25.6 billion) and HK$250 billion.

In May, Ping An Healthcare & Technology, a unit of Ping An Insurance Group, raised $1.12 billion in gross proceeds from an initial public offering, and Chinese smartphone maker Xiaomi filed a prospectus for a keenly awaited IPO in the city that is reportedly expected to raise about $10 billion.

Large IPOs have been sporadic in Malaysia since 2012 when state-run planter Felda Global Ventures Holdings raised $3.1 billion, followed by IHH Healthcare that mopped up $2 billion and cable-TV operator Astro Malaysia raised $1.5 billion. Last year, there were 12 new listings worth 7.2 billion ringgit on Bursa Malaysia with Lotte Chemical Titan Holding raising 3.77 billion ringgit ($877.15 million) from the largest IPO in July, according to Securities Commission Malaysia data.

"Investors have not had the opportunity to invest into a major IPO since mid-2017," said Manimekalanandan. "We expect pent-up demand for the IPOs which do come to market."

The benchmark FTSE Bursa Malaysia KLCI has shed 2.5% and the ringgit has weakened 0.8% since financial markets opened on May 14 after the Alliance of Hope coalition swept to power to end a 61-year uninterrupted rule of the National Front.

The newly-elected Prime Minister Mahathir Mohamad swiftly took command by naming key ministers to the federal cabinet. To help his inexperienced coalition to govern, Mahathir has also formed a temporary special economic advisory council that includes former central bank governor Zeti Akhtar Aziz.

Still, there could be short-term uncertainties in the financial markets - be it in equities, bonds or currencies - until there are clear and transparent policy formulation, said Yip Kit Weng, head of investment banking for Malaysia at Nomura Securities.

"The first 100 days will be crucial for the new coalition government," he said. "Besides investor education, a lot of investor feedback will need to be gathered by potential issuers before they hit the market."

While there would be more companies coming into the market in the next two to three years, the Malaysian IPO market could improve further with new policies aimed at promoting domestic listings, said Arvin Chia, head of equity capital markets at Affin Hwang Investment Bank.

"If the new government comes up with interesting policies, companies that have previously looked at London or Singapore to list could look at local market," said Chia.

--Jason Ng

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