Conducive environment seen for IPOs this year
Better prospects for the stock market in 2024 will foster a more conducive environment for initial public offerings (IPOs) this year, especially among small and medium enterprises (SMEs).
Mohd Sedek Jantan, the head of wealth research and advisory and designated portfolio manager at UOB Kay Hian Wealth Advisors, said the barometer index was anticipated to perform positively this year, projecting the index to reach 1,605 points.
He said the stock market displayed a positive trajectory in the first quarter with the FTSE Bursa Malaysia KLCI index ending at 1,536.07, up 5.6 per cent. An upward trend was sustained throughout the quarter, with the index reaching its peak at 1,558, underpinned by a resilient economy and effective policy implementation.
Other growth factors included appealing valuations, high dividend yields and a depreciation in ringgit, which attracted more investments.
“The correlation between IPOs and market indices can be intricate. Generally, positive market indices, indicative of investor confidence and economic health, can foster a conducive environment for IPOs,” he said.
He also said given the market’s anticipation of forthcoming rate cuts, the upward trajectory would likely persist.
“Small- and mid-cap stocks may serve as indicators of growth or value. However, it’s important to note that the IPO performance is influenced not only by broader market conditions but also by individual company prospects and macroeconomic factors at the time of the IPO.”
Therefore, Sedek said companies that want to do an IPO must be prepared to navigate through transient market windows and potential shifts in valuations, adding that the post-listing performance would serve as a crucial gauge of success.
He said despite a subdued market in the first quarter, Malaysia and Indonesia remained prominent destinations for IPO issuers in the region. Nine IPOs were listed on Bursa Malaysia, comprising eight in the ACE Market and Prolintas Infra Business Trust in the Main Market.
Overall, the Asean region saw 38 IPOs, raising US$1 billion. This marked a decline of 27 per cent in the number of IPOs and a 31 per cent fall in proceeds.
Sedek believed the move to expedite to three months for new applications received from March 1 for the Main Market and ACE Market demonstrated a strategic initiative to simplify and accelerate the listing process, which will have positive effects in multiple areas.
“This development is set to stimulate market activity, fostering increased investor confidence in the strength of our regulatory framework and market transparency. In addition, the accelerated approval process can boost economic growth by making it easier for companies to access capital quickly,” he said.
This, in turn, allows them to pursue expansion projects, encourage innovation, and create jobs.
“This initiative competitively positions Malaysia, potentially making it a preferred choice for companies considering public listings in the region.”