Forex Marketz Daily Forex News – Fully Markets Update
Malaysian fund raising: Deals dry up in once-hot IPO market
KUALA LUMPUR (NewsRise) — Fund raising activities have shrivelled in Malaysia, a red-hot initial public offering market only three years ago, as weak share market and political uncertainty amid a slowing economy prompted companies to scrap or delay listings worth about $5 billion so far this year.
Bankers say prospects of this deal drought easing anytime soon appears bleak, as investors grapple with feeble share prices while the Malaysian ringgit hovers near record-lows. A slump in crude oil prices, concerns over foreign outflows, multiple probes on a debt-ridden state investment fund and its alleged financial link with Prime Minister Najib Razak have also sapped investors’ confidence.
“Stock markets haven’t been performing well. So, whoever wants to do an IPO will delay it, if they have the ability, as one won’t be able to get the desired valuation,” said Affin Hwang Asset Management’s David Ng, who manages assets worth $6.8 billion.
Malaysian companies have raised $1.09 billion since January through IPOs, trailing the $1.26 billion raised in the same period last year, according to data from Dealogic.
The deals are dwarfed by 2012’s $3.3 billion listing by palm oil planter Felda Global Ventures Holdings Bhd., and a $2 billion offering by hospital operator IHH Healthcare Bhd., which lifted Kuala Lumpur to the top five venues for listings globally.
The largest issue so far this year has been a $792 million listing in April of power producer Malakoff Corp owned by Malaysian industrial and infrastructure group MMC Corp.
Companies that have delayed their fundraisings include the world’s largest palm oil producer by acreage Sime Darby Bhd, which deferred a $700 million IPO of its automotive business, and helicopter services firm Weststar Aviation Services Bhd that put on hold a $500 million deal.
The biggest IPO planned for this year would have been that of 1Malaysia Development Bhd. which aimed to raise more than $3 billion. The state investment fund, also known as 1MDB, is facing cash crunch after racking up over $11 billion in borrowings and is now pursuing asset sales.
Still, some companies decided to brave the market with small IPOs. Al-Salam REIT was listed earlier this week after the property trust, which primarily owns commercial and industrial assets, raised $60 million through initial share sale.
The stock rose as much as 13% from its IPO price of 1.00 ringgit since its Tuesday listing before paring gains and ended at 1.02 ringgit on Wednesday.
The country’s benchmark FTSE Bursa Malaysia KLCI has lost 7.8% while the ringgit, Asia’s worst performing currency, has been testing new 17-year lows after shedding nearly 20% of its value against the U.S. dollar this year.
Regional share markets too have faltered. Year-to-date, Singapore’s Straits Times Index has lost 16.4% while Thailand’s SET Index fell 9.5% and the Jakarta Composite Index declined 18.7%.
Most Asian currencies and equity markets remain under pressure although “the China-led panic that swept through Asian markets in August has subsided over the past month,” Capital Economics analysts Daniel Martin and Krystal Tan wrote in an investor note.
“Investor sentiment toward the region is unlikely to improve until there are stronger signs that China’s economy is stabilising and there is more certainty over the outlook for monetary policy in the U.S.,” they added.
Foreign investors have sold 17.7 billion ringgit ($3.99 billion) worth of Malaysian shares since January, more than double the 6.9 billion ringgit outflow recorded for entire 2014, according to data from MIDF Amanah Investment Bank.
Last month, in a bid to perk up the sagging stock market, Najib announced a move to inject about $4.6 billion into undervalued shares.
“It’s not just the question of valuations, but also investor appetite,” said a Kuala Lumpur-based investment banker, who didn’t wish to be identified. “Investors will find it difficult to invest in a highly uncertain market so it’s better for them to keep more cash.”
