Market volatility could curb zeal for LEAP

> Observers fear that investors may stay on the sideline and drag valuations

PETALING JAYA: Advisory firm DWA Advisory Sdn Bhd believes LEAP (Leading Entrepreneur Accelerator Platform) market listings are still attractive to companies looking to raise funds, but worries that investors may stay on the sidelines of new listings given the current market environment, thus affecting valuations of prospective issuers.

“Our greater concern (to deal with) in the current market environment, is possibility of investors becoming more cautious on putting money for new listings,” a spokesman told SunBiz recently.

He opined that it is understandable that recent global events such as possible trade actions between the two major economies – US and China – may have shaken the confidence of retail and institutional investors.

Additionally, the advisory firm pointed that there could be delay on the listings as prospective issuers are seeking investors and best time window to list under the current market environment.

“We do take note that the current market conditions as well as ringgit volatility may have an impact on businesses particularly those who have dealings beyond Malaysia (whether such companies are listed or unlisted).

“However, in our honest opinion, we do not foresee that these conditions would discourage companies to list on the LEAP Market unless such companies are really adversely affected but seeing as most of the LEAP Market candidates are SMEs, such exposure may be limited to a certain extent,” it said.

Checks by SunBiz recently showed that the LEAP Market recorded thin trading volume, with most days seeing no transactions recorded in the past few weeks.

Another financial adviser who requested anonymity said the thin trading volume in the LEAP Market is probably because the market is restricted to only sophisticated investors, i.e. individuals with more than RM3 million in assets or more than RM300,000 in annual income, and corporates with net assets of more than RM10 million.

“These group of investors are savvy, and most likely not speculating on stock prices, but rather riding on the longer term business growth to realise their investment.

“And since the general public can’t participate in the LEAP market, and the institutional investors shy away from low liquidity stocks, that already restricts the amount of trading tremendously,” he added.

He further explained that the thin trading volume in the LEAP market is only temporary for the businesses listed there.

“If they make good use of the fund raised, and expand their business, they will move to the bigger market where trading volume is vibrant,” he added.

Meanwhile, DWA said that the volatile swings in the market of late could still be an opportune time for the small and medium enterprise (SME) companies to capitalise on the advantages of being listed, particularly on the LEAP Market.

To-date, eight companies are listed on the LEAP Market.