40 target listings

BURSA Malaysia’s target of getting 40 new listings next year is commendable. While the local bourse is perceived to be lagging behind its counterparts in countries like Singapore and Hong Kong, there are some facts about Bursa which are impressive.

As its chief executive officer Datuk Muhamad Umar Swift recently pointed out, the local stock exchange ranked second in Asean for equity funds raised, market capitalisation and number of initial public offerings (IPOS) as at September 2019.

The number of listings for the year, up to that point, had risen to 28 versus a total of 21 in 2018.

However, what is notable is that the companies listed this year were mostly small ones, with the exception of Leong Hup International Bhd. And even then, Leong Hup is deemed to be a “recycled” listing, in the sense that it used to be listed before.

To be sure, the company had gone through many changes since it was privatised and so the entity coming back to list was significantly bigger and more attractive.

Still, the fact remains that there is a dearth of new large companies in Malaysia. Other recent large IPOS on Bursa were also relistings.

Malaysia may have a structural problem in not creating enough new large companies. One reason is the lack of high-technology companies. Here, we don’t mean just Internet-based ones but also companies which have invested heavily in research and development.

There are other challenges in the market. Not all IPOS have done well. Some have dropped below their IPO price post-listing.

That could be due to mispricing, but many IPO investors are also seen to be selling out of their companies too quickly. Could this be the new norm as investors remain jittery in the current market conditions?