Southeast Asia set for boom in IPOs as stocks markets rebound

Southeast Asia set for boom in IPOs as stocks markets rebound

Muralikumar Anantharaman, Reuters, Singapore

Southeast Asia is gearing up for a bounty of new equity offerings in 2002 following a stunning rebound in the region's stock markets, as the deep scars of last year's global economic and market woes begin to fade.

Companies are preparing to raise some US$5 billion to $7 billion through initial public offerings (IPOs) in the region, if the economic recovery sustains, and government sell-offs could claw in even more.

"There's pent up demand in a recovering world economic situation. I expect that going forward, there will be a flood of IPOs," said Choo Chee Kong, chief executive officer of Singapore's SBI E2-Capital Pte Ltd., part of the investment group of Japan's Softbank Corp.

Thailand's privatization of state enterprises is expected to raise the market capitalization of its stock exchange by at least $10 billion in 2002 as the government pursues its plan to list 16 of its 85 enterprises by 2003.

In Singapore, large issues postponed indefinitely from last year, like those by port operator PSA Corp., utility Singapore Power and television broadcaster MediaCorp, may be floated this year, possibly raising some $2 billion, analysts said.

Toll road operator PLUS and top cellular operator Maxis are expected to dominate investor interest in Malaysia as the two firms aim to raise about $1.6 billion from IPOs later this year.

In Indonesia, the recent sale of the country's largest retail bank, Bank Central Asia (BCA), to U.S. investment firm Farallon Capital Management has perked up investor sentiment.

"I think this year will be better. Market confidence has improved," said Akhabani, head of investment banking firm PT Trimegah Securities

There is talk that state-owned Philippine Amusement & Gaming Corp may proceed with a planned IPO this year and that the government may list a portion of the National Power Corp transmission assets to be disposed off under its privatization plan.

"Market's appetite for new shares remain quite high as investors can make quick profits from the stocks (when they start trading). We are looking at new IPOs as well," said Maris Tarab, managing director at ING Mutual Funds Management (Thailand), which manages about $104 million.

A stunning recovery in the region's stock markets on the back of big interest rate cuts has driven benchmark indices up between 25 percent and 42 percent in the past six months.

"There's definitely a pick-up now in IPO activity compared to three-four months ago when the mood was more sombre," said Tan Jeh Wuan, managing director of equity capital markets, at DBS Bank, a unit of Singapore's DBS Group Holdings

But after a virtual drought of issues following the September 11 attacks in the United States, IPOs have started 2002 slowly.

In Singapore, one of the bigger markets in the region, just five firms floated in 2002 up to March 20, raising a paltry S$32 million, compared with nine firms which garnered S$195 million in the same period of last year.

Thailand and Malaysia have seen some small offerings, there have been five on the Jakarta Stock Exchange and only one in the Philippines.

"The bounce in the market has caught a lot of bankers offguard, which means they have no products to offer the market when it is good like it is now," said Choo of SBI E2.

Both retail and institutional investors are being drawn to the new issues, analysts said.

"Liquidity is fueling retail interest. Moreover, the risk aversion is now probably lower and, as such, institutional funds are willing to look at small caps," said Andrew Tan, vice- president at fund manager Target Asset Management, which manages about S$130 million in Singapore.

Some investors cautioned there were still a few factors which might nip the budding recovery in the IPO market.

"Oil prices are going up. You don't know how strong the U.S. recovery will be and how much interest rates will go up," said Lim Fang Suan, a fund manager at SG Asset Management, which manages more than US$2 billion out of Singapore.