In the first half of 2023, the Southeast Asian IPO landscape faced substantial challenges, as highlighted by the latest report from DeloitteGeopolitical uncertainties, persistently high interest rates, and a contraction in liquidity exerted a heavy toll on the market, leading to a stark decline in operationsSpecifically, the region saw a 21% drop in the number of new IPOs, counting a total of 67 transactions, while the capital raised through these offerings plummeted by 59% to approximately $1.4 billionOverall, the market capitalization of these IPOs shrank by an alarming 71%, settling at $5.8 billion, extending a downturn that began in the latter part of 2022.

Deloitte's findings underscored a dire absence of significant IPOs in the region during the first six months of the yearOnly one major IPO emerged, with a valuation exceeding $1 billion and fundraising above $200 million

In stark contrast, the previous year had witnessed three substantial IPOs, each exceeding $600 millionThis dramatic shift indicates a pervasive sense of investor pessimism and uncertainty surrounding macroeconomic conditions, a sentiment echoed among companies contemplating listing.

Singapore felt the brunt of this turmoil, registering an almost 80% decline in stock financing, which marks the lowest level in nearly three decadesThe data revealed that only six companies undertook IPOs, raising a collective total of $5.93 million—a modest increase of 8.6% year-on-yearHowever, it's noteworthy that only one of these enterprises opted for a local listing; the others chose to list in overseas markets, including the US and Hong KongSuch a decision has proven critical as these entities have struggled post-IPO, experiencing a downward trend in share pricesMoreover, the high compliance costs associated with foreign listings further complicate their ability to maintain investor confidence and stabilize market valuations amid economic volatility.

The adverse macroeconomic climate and prolonged high interest rates have significantly hindered Singapore-based stock financing, pushing it down by 77.4% to $593 million during the first half of the year

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This figure closely approached the historically low financing amount of $530 million recorded in the first half of 1996. According to a report from the London Stock Exchange Group (LSEG), the total funds raised through subsequent offerings by Singapore-listed companies further diminished to $530 million, marking a 76.6% drop compared to the previous year.

Indonesia, which prominently led the IPO market last year, found itself in a dismal situation during the first half of 2023. Investors have largely adopted a wait-and-see approach, holding out hope for more favorable economic policies from the newly formed governmentStrikingly, the market capitalization of companies that completed their IPOs in Indonesia decreased by 92.2%, descending to $1.22 billionThe total capital raised plummeted by 89.1%, landing at $248 million, with the number of public listings down by 43.2% to just 25.

Meanwhile, Malaysia maintained a significant presence in the Southeast Asian IPO scene, accounting for about 30% of the region's total IPOs

In the first half of the year, Malaysia recorded 21 IPOs that collectively raised $450 million, which represents 33% of the region’s total fundraising, a notable leap from last year’s 15%. Despite this increase, driven primarily by the underperformance of other countries, the average fundraising per new issue remains disappointingLast year, there were 16 new stocks listed, raising a combined $510 millionThis year, the increased number of listings didn’t translate into higher capital gathered due to smaller company sizes.

According to Deloitte Malaysia’s IPO market expert, Hong Jia Jun, Malaysia has seen a consistent trend since 2018, wherein the number of new companies entering the growth-focused market outstripped the main board listingsNotably, many of these growth companies enjoy a surge in stock prices post-listing, with about half experiencing double-digit gains within a week, signaling that valuations are on point and liquidity remains robust

He forecasts that the consumer sector, bolstered by well-known brands, will continue to be a cornerstone of the Malaysian economy, providing an optimistic outlook for the IPO market in the second half of the year.

Furthermore, Zheng Huiling, a partner in Deloitte’s Southeast Asia accounting services and financial reporting division, attributed the tepid IPO market to a mix of positive economic forecasts overshadowed by the impacts of geopolitical instability and high-interest environmentsThese factors collectively dampen investor sentiment, leading to a subdued IPO market in the first half of the year.

Looking ahead, potential interest rate cuts could catalyze a resurgence in the market for real estate investment trusts (REITs) in the regionAdditionally, many artificial intelligence (AI) companies are still in their infancy and may contribute to a new wave of IPO activity in the coming years

Zheng is optimistic about witnessing a significant influx of AI-related IPOs, which could revitalize the capital markets and introduce fresh opportunities.

Deloitte also anticipates that the IPO situation in Southeast Asia will improve next year, fueled by rising expectations for interest rate reductions and the impending influx of AI-related listingsHistorically, the second half of the year has generally outperformed the first half in terms of IPO activity, particularly in the period between 2020 and 2022.

In a broader context, the global IPO trends observed in a report released by Ernst & Young on June 27 also reflect the general market turmoilThe Asia-Pacific region saw a year-on-year drop of 73% in IPO financing during the first half, totaling $10.4 billion, alongside a 43% decline in the number of IPOs to 216. This downturn persists in contrast to favorable IPO conditions found in regions such as Europe, the Middle East, India, and Africa