According to a Deloitte analysis, the market capitalization of Southeast Asia’s first public offerings (IPOs) fell 71% to $5.8 billion in the first half of 2024.

In the first half of the year, there were just 67 initial public offerings in the area, a decrease of 21.2% from the same time last year. These IPOs raised $1.4 billion, a 53.3% decrease in revenue from the previous year.

According to Deloitte, there was just one sizable IPO with a market valuation of more than $1 billion and a raise of more than $200 million between January and June. There were no spectacular IPOs during that time. A year earlier at this same period, three sizable initial public offerings (IPOs) raised over $600 million apiece.

Based on statistics from Deloitte, this indicates a persistent declining trend that started in the second part of 2022.

As investors and IPO candidates continue to manage macroeconomic variables, the declining trend indicates “subdued IPO market sentiments,” according to Deloitte.

The second half of the year “has always been the better performing half between 2020 and 2022,” the research said historically.

In the upcoming years, we expect a sizable wave of AI IPOs to hit the IPO capital markets, bringing innovation and fresh possibilities to the industry.

“Despite a positive growth outlook and increasing foreign direct investment in Southeast Asia, the prolonged geopolitical instability and high interest rates environment have been the significant factors affecting the market conditions and investor sentiments in Southeast Asia,” said Tay Hwee Ling, Deloitte’s Southeast Asia accounting and reporting assurance leader.

According to Deloitte experts, high interest rates could continue in 2024 as governments deal with worries about inflation.

In light of this, investors focused more on “proven profitability and sustainable cash flows” than on the growth-at-all-costs strategy that a lot of businesses used between 2020 and 2022.

Of all the Southeast Asian nations, Indonesia suffered the most noticeable decline.

“Indonesia, which topped the 2023 [Southeast Asia] IPO charts, experienced a significant decline in the first half of 2024, as investors and IPO aspirants adopted a wait-and-see approach in light of the presidential elections in February 2024 and in anticipation of new economic policies,” Deloitte’s analysts said.

While IPO funds raised decreased by 89.1% to $248 million from January to June, the market value of Indonesian listings declined by 92.2% to $1.22 billion. In the first half of this year, there were 25 Indonesian listings, compared to 44 during the same period previous year, a decrease of 43.2%.

“There is cautious optimism that conditions will improve beyond 2024, even though Southeast Asia’s IPO market may appear subdued in 2024,” Tay stated.

According to Tay, lower interest rates are expected in the near future, which may stimulate the comeback of REIT [real estate investment trusts] listings. Additionally, as many AI businesses are still in their infancy, Tay stated that artificial intelligence-related IPOs may soon be coming to market.

“We anticipate a significant wave of AI IPOs tapping on the IPO capital markets in the coming years, bringing innovation and new opportunities to the market,” Tay said.

(Adapted from CNBC.com)

Categories: Economy & Finance, Entrepreneurship, Regulations & Legal, Strategy