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The Star
3 days ago
- Business
- The Star
Global issues cloud 2H25 IPO outlook
PETALING JAYA: The initial public offering (IPO) market, which started the year on a subdued note, faces an uncertain second half (2H25) as weak market sentiment, global headwinds and poor earnings season continue to dampen investor appetite. A market watcher says the outlook for IPOs in 2H25 hinges on several unresolved global issues – including the outcome of potential US reciprocal trade tariffs expected in July, US-China trade tensions and the timing of a US interest rate cut, if any. 'The market sentiment isn't good. Last year, about 80% to 85% of IPOs performed well post-listing. 'This year, it's the complete opposite – nearly 80% have traded below their offer prices,' Tradeview Capital chief executive officer and founder Ng Zhu Hann told StarBiz. 'So, what changed? Largely, to me, it is – of course – market fatigue, fund flows, and also because the global situation has made a lot of investors, whether local, institutional, foreign funds or even local retail investors, very risk-averse. 'A lot of people are holding on to their cash rather than participating in the equity market.' Domestically, Ng said a lacklustre corporate earnings season has added to investor caution. To-date, 28 companies have been listed on Bursa Malaysia this year, with Paradigm Real Estate Investment Trust making its debut yesterday. Another three are expected to list by end-June – Ping Edge Technology Bhd (June 13), Cuckoo International (M) Bhd (June 24) and Pan Merchant Bhd (June 26) – bringing the first-half total to 31 IPOs. This puts Bursa Malaysia slightly past the halfway mark of its full-year target of 60 IPOs, but Ng warned that delays and repricings suggest growing caution among potential debutants. 'We've already seen two or three companies pushing back their listings,' said Ng. 'Several IPOs also revised their offer prices downward.' Cuckoo, which was initially scheduled to list on April 30, deferred its debut to June 24 due to 'near-term market challenges'. Its IPO price was also reported to have been revised to RM1.10 per share from RM1.29 previously, although this has yet to be confirmed by the company. Eco-Shop Marketing Bhd, which has since listed, similarly trimmed its IPO price to RM1.13 from RM1.21 before going public. Whether Bursa Malaysia hits its target of 60 listings this year now depends not just on pipeline readiness – but on whether the broader market gives debutants a reason to come forward. Across the shore, Singapore is taking a markedly different approach to reinvigorate its equity market. In February, the Monetary Authority of Singapore or MAS rolled out a bold S$5bil Equity Market Development Programme to boost liquidity on the Singapore Exchange by investing through selected fund managers focused on actively managed strategies targeting local small and mid-cap stocks. This is complemented by tax exemptions on fund manager income 'derived from funds investing substantially in Singapore-listed equities', a narrowed Global Investor Programme to channel more capital into listed equities, and expanded research grants to improve coverage and investor engagement in the equity market.
The Star
02-05-2025
- Business
- The Star
Reduced expectations of IPOs
KUALA LUMPUR: Recent performances of initial public offerings (IPOs) on Bursa Malaysia indicates that there will be no more 'guaranteed' upsides for new listings especially on its debut day anymore. This is the sense that brokers, fund managers and analysts are getting; compared to just last year where IPO outperformance, especially upon its listing on the first day, was almost guaranteed. Negative sentiments following the flare ups in trade tensions and reciprocal tariffs appeared to have reduced expectations of outperformance of new listings. Fundamentals, right business strategy and reasonable valuations would be key to attracting investors to IPO counters, analysts said. 'I don't think there will be anymore of such irrationality for now,' said an analyst. Meanwhile, Tradeview Capital founder and chief executive officer (CEO) Ng Zhu Hann pointed to the recent delays of two planned IPOs that indicate the rather subdued level of risk sentiment now. Cuckoo International (MAL) Bhd had in early April said it was postponing its planned listing by some two months which is expected to complete by June 24. SPB Development Bhd had earlier delayed the launch of its Main Market IPO to an unspecified date on market uncertainties. 'Many new listing's share prices in the first quarter are trading below their IPO price. This is compared to last year where 80% to 90% of new listings had performed better than their reference price. 'The two delayed IPOs of SPB and Cuckoo points to weaker sentiment on the take up rate of these IPOs and risk appetite is quite weak in the first quarter,' Ng told StarBiz. 'If they had proceeded, shareholders could have potentially lost money there. If the uncertainty prolongs, then it is likely that Bursa Malaysia would find it difficult to secure the targeted 60 new listings this year,' he added. However, Bursa Malaysia's CEO Datuk Fad'l Mohamed said earlier in the week that it is on track to meeting its full-year target of 60 IPOs despite the present volatile economic environment. There were 16 IPOs year-to-date. According to Mercury Securities, larger IPOs with bigger market capitalisation tend to benefit from the larger investor pools and greater interests from retail and institutional investors as there are more sell-side coverage and meet funds' investment mandate. These factors contribute to enhanced price discovery and aftermarket support, it said. On the other hand, it noted micro-cap listings or those typically with less than RM100mil in market capitalisation continue to face structural headwinds with weak price momentum post-IPO. These were seen through the thin trading volumes, minimal research coverage and usually limited institutional interest, Mercury Securities said. 'A case in point is Sik Cheong Bhd that has a market cap of RM71.8mil, has since recorded a 46.3% decline in share price. The stock's struggle highlights the liquidity discount often applied to micro-cap names despite of the fundamental strength of the company remain intact,' it said. These appear to reinforce a broader theme that scale is becoming a proxy for investability, it said. 'As volatility and uncertainty remain elevated in broader market, investors tend to favour IPOs offering better market liquidity as this help to facilitate sustained demand interest (retail and institutional flows), while providing greater flexibility to exit positions efficiently in the event of uncertainty,' the research house noted. Moving forward, Ng said he expects appetite for new IPO listings to recover sometime in the second half of this year noting of the meaningful recovery of the FBM KLCI levels from the index's year-to-date lows of 1,386.63 points. The FBM KLCI closed at 1,540.22 points on Wednesday. 'But the market's average daily trading values are still below RM2bil since then and it indicates participation is not yet broad-based. I would suggest investors to be selective in picking IPOs to invest into,' he said. But confidence could be returning sooner than expected as Eco-Shop Marketing Bhd just announced plans to raise RM419.87mil for a planned upcoming listing on the Main Market of Bursa Malaysia. The dollar store retailer plans to use the raised funds to expand its retail footprint and distribution centres nationwide; invest into information technology hardware and software and; repay bank borrowings. This will be the largest IPO to be launched in Malaysia over the past eight months. The retail portion offers about 187 million new shares at RM1.21 each. Ten cornerstone investors have collectively already subscribed 90.31% of Eco-Shop's total institutional offering excluding the bumiputra portion under the Investment, Trade and Industry Ministry, the company said. The cornerstone investors included AHAM Asset Management Bhd, Albizia Capital Pte Ltd, Areca Capital Sdn Bhd, Eastspring Investments Bhd, Kairous Equity Sdn Bhd, Kenanga Investors Bhd, Kenanga Islamic Investors Bhd, Lion Global Investors Ltd and RHB Asset Management Sdn Bhd. In the last six months, Mercury Securities noted there were a total of 42 IPOs on Bursa Malaysia. Among these, it noted of strong first-day performers on the Main Market were Life Water Bhd (44.6%), Azam Jaya Bhd (39.7%), and 99 Speed Mart Retail Holdings Bhd (13.9%). 'There is a huge disparity between the first day performance and the post IPO performance. 'While certain IPOs like Steel Hawk Bhd (130%) and Oriental Kopi Holdings Bhd (98.9%) delivered eye-catching returns, more than 70% of the IPOs are now underperforming and trading below their IPO offering price,' Mercury Securities said. 'The phenomenon of strong first-day pops followed by subdued price action or retracement post listing, indicating a clear signal that investors are increasingly discriminating between quality and hype,' it added. It noted of IPOs which debuted in March and April 2025 was during a time period that was marked by surge in geopolitical and macroeconomic uncertainty had mostly seen lackluster first-day performances and have generally underperformed days after its listing. 'In such an environment, new listings face an uphill battle to attract sustained buying interest, particularly in the absence of strong fundamentals or compelling growth catalysts,' the research house said.
