Issuers feel brunt of financial woes in Southeast Asia

Issuers feel brunt of financial woes in Southeast Asia

SINGAPORE (Reuter): Currency turmoil in Southeast Asia has
wreaked havoc on local stock markets and brought the market for
initial public offerings (IPOs) to a virtual standstill in some
countries, investment bankers said.

While investor interest in some markets, such as Hong Kong,
appears to be holding up, other markets, like Thailand, are not
so lucky.

And despite efforts to keep up "business as usual", the
constant battering of stocks in the area keeps claiming victims.
In the Philippines on Friday, Philippine Seven Corp, the
exclusive local holder of the 7-Eleven franchise, said it was
postponing an IPO planned for September.

"Everybody is bullish about the company, its good prospects
and all that. But the market is down. Are we going to fight that
market?" asked Dennis Santa Catalina, vice president for finance
at lead underwriter BPI Capital.

Apparently not. He said the deal would be postponed until
October or perhaps later.

Because many Asian markets track Wall Street, the recent
gyrations there have exacerbated the volatility in Asia.

On Friday, Asian stocks dived on local concerns and a sharp
drop in the Dow Jones Industrial Average overnight. Indonesian
and Thai stocks both shed more than five percent at one point.

With the Thai baht the first focus of speculative attack in
the region, and having succumbed to it, it is not surprising Thai
IPOs have suffered the most. Only four have been launched this
year, and a dramatic change is unlikely.

"It would take at least two years for the IPO market to
recover," said Thanathip Vidhayasirinun, head of investment
banking at Cathay Capital in Bangkok.

"It's the lack of liquidity in the financial market as a
whole," he added. "Most IPOs have been delayed indefinitely."

The financial crisis in Thailand led to a massive $16 billion-
plus bail-out led by the International Monetary Fund (IMF), Japan
and other Asian countries.

Contagion from Thailand's crisis flowed into currency markets
in the Philippines, Indonesia, Malaysia and Singapore, weakening
their stock markets.

Investment bankers say a major concern for IPOs is the initial
performance of an issue.

This view was reinforced in Indonesia when textile company PT
Sunson Textile Manufacturer made a disastrous debut on Wednesday.
It closed the day at 650 rupiah against an offer price of 850 and
did not improve.

"Many of this year's IPOs gave players some 20 percent gains
on debut. The gains are almost taken for granted. Today, the
rupiah worries have made it the other way around," one broker
said.

The erosion of the premium has held back issuance in Malaysia.

"If you don't get a big premium on the first day, the stock
will hover around that level for some time," said a corporate
finance officer at a merchant bank who asked not to be
identified.

So far this year there have been 59 new listings on the Kuala
Lumpur stock exchange, compared with 92 for all of 1996.

The situation appears a bit rosier in Singapore, where
investment bankers say the IPO market remains healthy.

"What matters is people have excess money. They can still make
a quick buck from IPOs. The speculative effect is still good,"
said a senior investment banker at a local bank.

But, bankers say, the issues that perform the best are those
denominated in U.S. dollars rather than in Singapore dollars.
Southeast Asia isn't alone in singing the IPO blues.

An economic slowdown, battered confidence and access to
cheaper funds abroad have straggled new issues by Indian firms.

"There's a dearth of quality issues," said Prithvi Haldea,
managing director of PRIME. "The really good ones are going
abroad because of better pricing," he added.

PRIME, a New Delhi-based primary market monitor, said there
were only 41 public issues between April and August this year
against 490 issues in the same period a year ago.

In contrast, analysts in Hong Kong are confident their
upcoming IPOs will escape injury from the currency turmoil.

"I do not see the currency turmoil having a significant impact
on the IPO market, especially since overall sentiment has been
boosted by the recent strong performance of some new listings,"
said Percy Au-young, director of research at DBS Securities.

Among the major upcoming issues in Hong Kong is the
blockbuster $2.0 billion offering by China Telecom (Hong Kong),
owned by China's Ministry of Posts and Telecommunications.