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.