Indonesia’s stock rout claims victim: the IPO market

THE sell-off sweeping the Indonesian market is turning into a spoiler for the local bourse’s goal of listing the most new companies in two decades.

At least three companies deferred initial public offering (IPO) plans last week, data compiled by Bloomberg show. State-backed insurer PT Asuransi Tugu Pratama Indonesia cut its issue size Friday by 37% and priced at the bottom of a marketed range. As the market slide gathered pace in recent weeks, hospital operator PT Medikaloka Hermina, Islamic finance group PT Bank BRISyariah and bathroom and kitchen products distributor PT Surya Pertiwi all priced their share sales near the low end.

Indonesian stocks, bonds and the rupiah are in the middle of a sell-off sweeping emerging markets as foreign investors dump riskier assets amid a rally in US dollar and Treasury yields. With the nation’s benchmark index tumbling 13% from its February record and the currency weakening to a 31- month low, the Indonesia Stock Exchange’s bid to list 50 companies this year remains a challenge.

“The market for IPO and other fundraising activities will be tough this year,” John Teja, a director at PT Ciptadana Sekuritas Asia, said in a May 17 interview. “Some companies may decide to defer or cancel the plan, and those who decide to go ahead will see very weak demand.”

Plastic pipe producer PT Wahana Vinyl Nusantara, paint manufacturer PT Avia Avian and local developer PT Wijaya Karya Realty announced the postponement of their IPOs last week. While Wijaya Karya Realty said it may consider selling shares in the second half, Avia Avian is delaying its offering to next year and Wahana Vinyl said it will monitor the market before revising its plan.

Overall fundraising from equity and rights offerings in Indonesia has fallen 4.2% this year to 8.88 trillion rupiah ($625 million), data compiled by Bloomberg show.

“The stocks are more volatile now, and investors may adopt a ‘wait and watch’ policy until volatility subsides,” Laksono Widodo, managing director of PT Mandiri Sekuritas in Jakarta, said by phone.

The stock sell-off prompted Mandiri Sekuritas to slash its year-end forecast for the Jakarta Composite Index by about 5% to 6,400, after first-quarter earnings growth missed the brokerage’s forecasts, according to Widodo. The rupiah may trade at 13,800 to the US dollar by yearend, weaker than Mandiri’s earlier forecast of 13,600, he said.

Global funds have sold $3 billion of Indonesian stocks this year, with foreign investors being net sellers for 20 days on the trot, according to data compiled by Bloomberg show. Net sales of rupiah bonds have surged to $2.3 billion since the end of March, set for the biggest quarterly withdrawal since Bloomberg started collecting the data in 2009.

The rupiah, which has declined 4.3% this year, is among the worst performers in Asia this year, while the benchmark bond yield is trading at its highest in 14 months. — Bloomberg