Malaysia IPOs jump as economy improves and investors return to the stock market

SINGAPORE – An increasing number of firms are listing in Malaysia as the economy picks up and investors return to the stock market.

There were 28 initial public offerings (IPOs) on Bursa Malaysia in the first seven months of the year that raised RM3.4 billion (S$1 billion) all up, making the country the best performing IPO market in South-east Asia.

The bourse is aiming for 42 IPOs in 2024 compared with 32 in 2023, and despite a US$6 trillion (S$7.9 trillion) wipe-out in global stock markets on Aug 5, experts said that target can be achieved on the back of a stronger economy and ample liquidity in the stock market.

The exchange’s Ace Market, which is designed for growth firms, has attracted 21 listings in 2024 while six joined the Main Market for more established companies, and one firm opted for the Leap Market, which is for accredited investors only.

Mr Raymond Chooi, regional head of equity capital markets at Maybank Investment Banking Group, noted that retail investors contributed to 13.2 per cent of the total funds raised during the period, with demand exceeding the shares available.

He added that most of the new listings in the Ace Market have recorded substantial gains in their post-listing share price.

Notably, two-thirds of the IPOs in 2024 were for companies with market values of below RM200 million. These registered an average return of 69.7 per cent within a week of listing, and many continued to trade well after the first week.

Examples include underground utilities engineer UUE Holdings, IT services company Go Hub Capital, and building support services provider KJTS Group.

This indicates “reasonable IPO valuations which are further supported by ample market liquidity”, said Mr Wong Kar Choon, a partner at Deloitte Malaysia.

Mr Chooi said that most IPOs in 2024 have raised a larger proportion of new capital, with the primary offer, or new shares issued, accounting for approximately two-thirds of total funds raised.

This suggests that companies are using IPOs to raise fresh capital for growth, rather than just allowing existing shareholders to exit.

“It is an indication that there is strong demand for growth capital by the small and mid-cap companies,” he said. 

The companies listing on Ace also do business in a wider range of sectors, including in technology, such as in-vitro fertilisation and 2D animation, as well as logistics, food distribution and metal fabrication.

Three more companies – palm olein repackaging firm Sik Cheong, biomass fuel products holding company Eldridge Energy Holdings and food processing and packaging provider EPB Group – will list on Ace in August.

Malaysia is also expecting its top mini-market chain retailer, 99 Speed Mart Retail Holdings, to make its market debut in September in an IPO targeting more than US$500 million in proceeds. That would make it Malaysia’s biggest listing in seven years.

The largest Malaysia listing so far in 2024 has been palm oil producer Johor Plantations Group, which raised RM735 million in July.

The liquidity in Malaysia’s stock market has also drawn listing interest from Singapore companies.

On July 17, local semiconductor firm UMS Holdings announced that it is eyeing a secondary listing in Malaysia to expand its investor base and boost stock liquidity.

Its potential listing comes after Johor-based pawnbroker Well Chip Group’s successful IPO on the Main Market. Well Chip, whose shares jumped more than 43 per cent on its debut on July 23, is an associate company of Singapore Exchange-listed ValueMax Group.

Attractive listing conditions

Mr Wong said favourable regulatory changes are among the factors that have driven the rise in Malaysia IPOs.

In February, Bursa Malaysia and the country’s capital markets regulator announced that the time required for IPO approvals would be reduced from up to 12 months to just three from March.

“This accelerated timeline makes it more feasible and appealing for companies to go public,” Mr Wong said.

The move also comes after Bursa Malaysia said in August 2023 that eligible newly listed technology-based companies are entitled to a tax deduction of up to RM1.5 million on the cost of listing from 2023 to 2025.

Other efforts by the bourse to draw new listings and investors have also contributed to a stronger IPO market.

Over the past year, the stock exchange has been establishing relationships with younger companies that have listing potential. It has also introduced new ways for younger investors to participate in the stock market, such as trading on digital platforms and fractional trading.

Stronger economy and equity market

Malaysia has implemented structural changes that have been beneficial to its economy and stock market. This is also driving interest in IPOs.

In May, for example, it announced the restructuring of its pension scheme, which involved distributing retirement funds across three accounts instead of two, and permitting members under 55 to withdraw cash from the third account for short-term financial needs.

The move indirectly led to higher consumer spending and more liquidity in the market, Mr Wong said.

Mr Chooi added that private and public investments made up 21 per cent of GDP in the first quarter of 2024, driven by investor interest in the semiconductor and data centre space, among others.

Malaysia’s economy expanded by 4.2 per cent in the first quarter of 2024, while advance estimates showed 5.8 per cent growth in the second quarter of the year.

Notwithstanding the Aug 5 stock market crash, the benchmark FTSE Bursa Malaysia KLCI index is up 9.3 per cent since the start of the year, the highest market return in Asean in 2024.

“There’s definitely a more confident tone coming from companies going public in Malaysia, stemming from better equity markets,” said J.P. Morgan’s head of South-east Asia Investment Banking, Mr Vineet Mishra.

This, in turn, is being driven by an improving macroeconomic backdrop, policy stability, local institutional investor support and Asean’s appeal to foreign investors seeking defensive, quality investments, Mr Mishra added.

“We are seeing better overall support for the Malaysian market.” 

More listings expected

Malaysia’s stock market can thus expect to see more companies, particularly small and medium-sized firms, going public in the next few months, Mr Mishra said.

Mr Wong noted that economic growth and increased private spending in Malaysia have created a favourable environment for consumer-focused companies, making them “a particularly hot area for IPOs in Malaysia this year”.

“As consumer demand rises, companies in this sector stand to benefit from higher revenue and growth prospects.”

He added that positive sentiment from retail and institutional investors like the nation’s pension fund, returning foreign investors and the diverse range of market segments, including the Main, Ace and Leap markets, are creating “a dynamic and appealing IPO landscape” in Malaysia.

These are reasons for “a hopeful IPO landscape for the rest of 2024”, he said.

Mr Chooi added that “the outlook for 2024 and 2025 remains bright for the IPO market as liquidity from institutional and retail investors is ample”.

Net fund inflows from domestic institutional investors have totalled RM2.6 billion so far in 2024, compared with RM3.1 billion for the whole of 2023, he said.