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