SINGAPORE (Dec 17): After a lacklustre 2018, Asean markets stand a chance of seeing higher levels of initial public offering (IPO) activity next year – but only if there is a turnaround in economic fundamentals which lead to greater geopolitical certainty, better trade relations, and an increase in liquidity.

Should fundamentals remain as they are, it may be until only 2H19 that Asia-Pacific IPO markets see a sustained improvement in activity.

This is according to the latest quarterly IPO trends report by EY, which found that Asean IPO volumes and proceeds fell by 27% and 56% to 36 IPOs and US$2.3 billion ($3.2 billion), respectively, in 4Q18.

The latest quarterly data highlights conclude 2018 Asean IPO volume and proceeds at 115 IPOs and US$7.1 billion, down by 7% and 34% compared to the previous year.

Accounting for the largest proportion (45%) of the full year’s deal volume is the Indonesia Stock Exchange (IDX) with 53 IPOs, which contributed to 16% of regional deal volume with US$1.2 billion.

Vietnam and Thailand stock exchanges notably led by proceeds with 36% of market share each, with both countries hosting two sizeable IPOs, especially Thailand Future Fund IPO, being the largest IPO within Asean this year.  

In its report, EY also notes that IPO activity over many parts of Asean, including Singapore, have predominantly been small-cap listings for YTD 2018.

Singapore has seen 13 IPOs totaling US0.5 billion in proceeds in the YTD, representing a 35% and 85% decline in deal volume and proceeds, respectively.

Going forward, EY is expecting sectors such as technology, media and entertainment issuers to continue driving Asia Pacific IPO markets in 2019 – but nonetheless sees investor appetite trending toward more traditional IPOs in the near-term as investors look to limit their risk.

“On the whole, 2018 was relatively quiet in the Southeast Asia IPO markets, as economic uncertainty, trade tensions and emerging market issues persist,” says Max Loh, Southeast Asia and Singapore IPO Leader, EY Asean and Singapore Managing Partner, Ernst & Young LLP.

“Looking ahead to 2019, with Asean exchanges innovating to build their IPO pipeline, and if geopolitical and economic volatility subsides, we may see more sustained IPO activity in the second half of 2019,” he adds.

Globally, IPO proceeds rose 6% to US$204.8 billion despite a 21% decline in volume to 1,359 IPOs.

EY attributes the growth in global proceeds beyond 2017 levels to the rise of unicorn-related IPO activity as well as mega IPOs, and expects this trend to continue well into 2019 with an increasing backlog of IPO candidates and more widely-available capital.

The firm also underscores a likelihood of global proceeds meeting or even exceeding 2018 levels – particularly if a greater number of unicorn firms as well as tech, industrials, consumer products and healthcare-linked companies come to the public capital markets in the year ahead.

Hong Kong, London and the US are expected to remain top destinations for IPO activity as EY anticipates the momentum of cross-border activity to continue into 2019.