Asia's thriving IPO mart stalled by dollar moves<\/p>\n
SINGAPORE (Reuter): On many bourses across Asia, a once
\nthriving market for initial public share offerings (IPOs) has
\nlost its vigor as investors take stock of the implications of the
\ndollar's recent sharp falls.<\/p>\n
\"The appetite for new issues in the last month or so has been
\nput on hold,\" said Bruce Rolph, head of research at Salomon
\nBrothers Singapore Pte Ltd.<\/p>\n
But Rolph believes that while the currency uncertainty has
\nheld up new issue activity in Asia, it is a temporary phenomenon.
\nOver the longer term, he expects structural changes in corporate
\nfinance to result in a greater mix of debt and equity in future.<\/p>\n
A survey of brokers and analysts across Asia reveals that in
\nthe equity markets of Singapore, Thailand, Malaysia and
\nIndonesia, currency uncertainty is having an impact on IPOs. But
\nin other areas like India, Australia and South Korea, the
\ndollar's gyrations are not seen directly hurting IPO activity.<\/p>\n
David Chang, research head of PT Sigma Batara in Jakarta, said
\nthe Indonesian capital market supervisory agency Bapepam had
\nindicated some 50 IPO applications were in the pipeline.<\/p>\n
\"But we expect many of these new issues to be postponed or
\ncanceled due to the prevailing weak sentiment in the regional
\nmarkets,\" Chang said.<\/p>\n
In Bangkok, Treekwan Bunnag, a managing director at Nithi
\nVenture Corp Plc, said investors were sensitive about the
\nfluctuating exchange rates. \"They're staying away from the
\nmarket,\" he said.<\/p>\n
Many companies in Bangkok issued new rights shares last year,
\nbut few have done so this year. The new rights issue market is
\nvery inactive now, said an Ekachart Finance broker.<\/p>\n
In Malaysia, larger companies have been slow to offer new
\nissues in the last six months as the market has been mostly in
\nthe doldrums, analysts said. \"If the market is like this, I would
\nhold back an IPO for as long as possible,\" said a research
\nmanager at a local brokerage.<\/p>\n
Kuala Lumpur Stock Exchange statistics show that in the last
\nthree months of 1994, only 12 main board stocks were listed
\ncompared to 26 second board ones.<\/p>\n
Fund raising<\/p>\n
In Singapore, Song Sen Wun, regional economist for S.G.
\nWarburg Securities, said issuers found it less attractive to
\nraise funds in the equity market this year compared with 1994.<\/p>\n
\"Analysts and investors are unsure what the impact of the
\nweaker U.S. dollar will be, which companies are hedging, and who
\nwill be winners and losers,\" Song said.<\/p>\n
But in Bombay, dealers said the dollar's gyrations have not
\naffected the buoyant Indian new issue market. Nor has there been
\nmuch impact in Sydney, where local analysts say the dollar\/yen
\nlevel has no direct impact on Australian new share issues.<\/p>\n
Easily the most significant factor on new share issues in
\nAustralia is the buoyancy of the local market, which this week
\nhit new highs. The Australian All Ordinaries index rose above key
\nresistance at 2,000 on Wednesday after two weeks of steady gains.<\/p>\n
The weaker dollar has also had little effect on plans by South
\nKorean companies to raise funds overseas. A Daewoo Securities
\nofficial said: \"Basically, the government controls the amount of
\nnew issues and the recent dollar plunge and higher yen has had
\nlittle impact on South Korean companies.\"<\/p>\n
Outside India, Australia and South Korea, companies in many
\nAsian nations appear to be reassessing financing plans and
\nturning from equity issues back to bank borrowing or trying new
\nmethods such as bond issues.<\/p>\n
In future, Warburg's Song said it was likely Singaporean
\ncompanies would use bank borrowings as a source of funding as
\nmonetary authorities are curbing lending to non-productive
\nsectors to fight asset inflation, while banks are sitting on huge
\ndeposits which they are more than willing to lend.<\/p>\n
Alternatives to equity raising in Kuala Lumpur are bank loans
\nand bond issues, but rising Malaysian interest rates act as a
\ndeterrent and underwriters are not keen to issue bonds for
\nlesser-known companies, analysts said.<\/p>\n
PT Sigma Batara's Chang said an alternative to equity market
\nraising in Jakarta has been the bond market.<\/p>\n
\"Currently, lending rates are about 19 percent, whereas firms
\nare able to raise funds through the bond market paying a coupon
\nrate of 17.5 percent over a five-year period,\" he said.<\/p>\n
Chang forecast Indonesian corporations would raise at least
\n1.5 trillion rupiah (US$48 billion) through bond issues this
\nyear, a rise of 76 percent from 1994.<\/p>",
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