Singapore to prop up South-east Asia's muted IPO market in 2017

KUALA LUMPUR/SINGAPORE (REUTERS) - Singapore is set to be 2017's hottest spot for initial public offerings (IPOs) in South-east Asia with sales of stakes in business and real estate trusts, while currency volatility and weak investor sentiment curb deals elsewhere in the region.

Singapore's stock exchange has promoted itself as a centre for business trusts and real estate investment trusts (Reits), which offer stable dividends. That has helped it partly make up for a drop in major share sales as large Chinese firms favour the higher valuations and liquidity of Hong Kong.

Fundraising via IPOs in Singapore hit US$1.7 billion (S$2.43 billion) last year, up fivefold from 2015 when it slumped to its lowest since 1998, Thomson Reuters data showed.

"Reits and business trusts have been the flavour for some time because they give a steady income stream for investors and typically the play in Singapore has been dividend-focused rather than pure capital gains-focused," said Srividya Gopalakrishnan, managing director of corporate finance advisor Duff & Phelps Singapore.

Dasin Retail Trust, comprising three shopping malls in Zhongshan city in China's Guangdong province, kicked off its S$146 million IPO this month.

Bankers also expect Singapore Telecommunications to list broadband unit NetLink Trust in the second half of the year, in a deal that could raise about US$2.5 billion.

Elsewhere in South-east Asia, significant fluctuation in the rupiah over the past year could dampen appetite for listings in Indonesia, while firebrand politics and a drop in the peso are risks for the Philippines, bankers and analysts said.

Higher benchmark interest rates under a new government in the United States could also tempt international investors to pull money out of riskier emerging markets, they said.

Sizeable listings are planned in Malaysia but market sentiment has been crushed by a slump in commodity prices and a financial scandal involving state investor 1Malaysia Development Bhd.

Last year, just US$238 million was raised in Kuala Lumpur IPOs, the lowest since 2008, Thomson Reuters data showed.

"We think that there is a healthy pipeline out there. However, because capital markets are so acutely vulnerable to investor sentiment and market conditions, it would be a matter of timing as to when these listings will happen," said Wong & Partners deputy managing partner Munir Abdul Aziz.

Oil and gas engineering firm Serba Dinamik Holdings Bhd, which aims to raise US$130 million through a listing early this year, has not secured cornerstone investors.

South-east Asia's IPO markets are typically volatile. Last year, fundraising from listings more than halved in Thailand to US$1.25 billion while in Indonesia, fundraising rose more than 50 per cent to top US$1 billion.

But the decline has been particularly sharp for Malaysia, which was Asia's IPO capital in 2012 with blockbuster listings from Felda Global Ventures Holdings Bhd and IHH Healthcare Bhd.

One senior official at Securities Commission Malaysia, however, expects a recovery this year. Listings planned include property developer Eco World International Bhd and fast-food restaurateur QSR Brands, which are looking to raise US$478 million and US$500 million respectively.

"We see global IPO markets picking up and we also see our IPO market picking up," commission chairman Ranjit Ajit Singh said on the sidelines of an industry event on Thursday (Jan 12). "Our estimates are around RM7 billion (S$2.24 billion)."