Deloitte: Southeast Asia Emerges as a Preferred IPO Market for Investors Despite Global Challenges

Southeast Asia’s IPO market is displaying promising signs despite a worldwide slowdown in IPO activity during the first half of 2023, as per a new report by Deloitte.

During the past six months, Southeast Asia witnessed the launch of 85 IPOs, raising $3.3 billion in capital, compared to the 73 IPOs that raised $3.1 billion in the same period last year. This represents a 16% increase in the number of IPOs and a 5% increase in capital raised.

“Southeast Asia’s positive growth outlook has made the region a favorite among investors due to increased foreign direct investment, the reopening of the tourism industry, and strong domestic demand,” stated the report.

“Collectively, these factors have contributed to the region’s robust economic growth, despite global uncertainties.”

The increase can largely be attributed to three IPOs in Indonesia that individually raised over $500 million, in contrast to just one major IPO last year — GoTo, the merged entity of Gojek and Tokopedia — which raised $1 billion.

Meanwhile, the Nasdaq, which is heavily focused on technology companies, has yet to witness a significant venture-backed tech IPO since the debut of HashiCorp in December 2021.

An EY report revealed a global IPO slowdown, with 5% fewer IPOs and a 36% decline in proceeds compared to the same period last year.

Indonesia accounted for 70% of the total IPO proceeds in Southeast Asia during the first half of 2023.

The IPO market in the world’s fourth most populous nation was highlighted by listings from three companies: PT Trimegah Bangun Persada Tbk (a nickel company), PT Merdeka Battery Materials Tbk (a minerals and EV battery materials firm), and PT Pertamina Geothermal Energy Tbk (a geothermal power plant operator).

Indonesian President Joko Widodo has implemented measures to position the country as a global hub for the electric vehicle supply chain, including collaboration deals with Australia for the production of key EV minerals such as lithium and nickel.

“Indonesia possesses the world’s largest nickel reserves, and the recent IPO of Harita Nickel (PT Trimegah Bangun Persada Tbk) is a testament to the interest of both local and international investors,” stated Deloitte.

Deloitte also mentioned that “2023 H1 looks set to be Indonesia’s most successful year in terms of IPO proceeds, with 44 IPOs.”

Thailand and Malaysia followed with 18 and 16 IPO listings, respectively, during the first half of 2023.

“With the pro-growth policies of each country, stable macroeconomics, the region’s favorable demographics, the growing impact of tech-enabled entrepreneurs on investments, and strong trading relationships with China, there are still plenty of exciting opportunities in the regional capital markets, with a healthy deal flow for investors to explore and capitalize on,” added Deloitte.

However, Deloitte cautiously remains optimistic about the region’s prospects in the second half of the year.

“It remains to be seen how Southeast Asia will navigate its economic recovery amidst the ongoing challenges,” stated Deloitte. The firm highlighted uncertainties such as potential interest rate hikes, banking sector troubles, and inflation that continue to affect the economy.

The International Monetary Fund expects Southeast Asia’s growth to slow from 5.7% in 2022 to 4.6% in 2023. Factors contributing to this include a slight moderation in domestic demand for Malaysia and Thailand, easing commodity prices in Indonesia and Malaysia, and weaker external demand from the U.S. and Europe.