LACKLUSTRE stock market conditions have hit the market for new listings, with IPO candidates forced to price shares on the cheap to attract investors.

The situation is in sharp contrast to two years ago when initial public offering (IPO) aspirants - companies wanting to issue common stock or shares to the public for the first time to raise capital - were able to command higher valuations because of the prevailing bull market.

This made IPOs an almost certain success for companies, with investors pouncing on new listings, often making them many times over-subscribed.

But the credit crunch and global economic downturn have deterred prospective issuers from listing. And there have been only three new listings during the first half of the year - a dramatic contrast to the 20 launched during the same period last year.

Deal numbers are down and new issues also have to be priced cheaper to attract increasingly risk-averse investors, say industry experts.

They add that subscribing for IPOs in the current market can still be profitable, but investors have to be highly selective.

Mr Ding Hock Chai, co-head of Kim Eng corporate finance, said: 'Investors have to be more selective of the companies. The natural concern for smaller market capitalisation deals for institutional investors is whether there are enough market participants and liquidity.'

Factors which determine a successful IPO include the offering size, company growth prospects, as well as share valuations, said Mr Ian Long, South-east Asia head of equity capital markets at Credit Suisse.

'The size of the offering should be substantial,' he said, indicating that a good IPO for the Singapore market would be about $100 million.

There also has to be a unique equity story, he said. 'For example, the company could be a niche player or has a good competitive advantage over others.'

Please read the full report in Thursday's edition of The Straits Times' Money.