Southeast Asia is weathering a slump in initial share sales better than markets including Hong Kong, as optimism about the region’s economic outlook draws investors to offerings in Malaysia, Thailand and the Philippines.
Felda Global Ventures Holdings Bhd., Malaysia’s biggest plantation owner, will tomorrow set the price of an initial public offering that may raise as much as $3.2 billion. The IPO, the biggest this year after Facebook Inc.’s (FB:US) sale, may bring proceeds in the region to $5 billion this year, compared with $1.4 billion in Hong Kong, data compiled by Bloomberg show.
With IPO markets worldwide roiled by Facebook’s plunging value and Europe’s sovereign debt crisis, Felda Global and IHH Healthcare Bhd. are pushing ahead with deals. Companies that went public in Southeast Asia since the start of last year have outperformed IPO stocks globally, helping bolster confidence in the region’s equity capital markets as China’s and India’s economies cool.
“Southeast Asia is becoming more visible and interesting to investors,” said Vineet Mishra, JPMorgan Chase & Co.’s head of equity capital markets for the region. “The strength of the local economies is driving investor interest.”
Felda Global (FGVH) drew orders from institutional investors for about 20 times the stock available to them, two people with knowledge of the matter said yesterday. As much as 10 percent of the palm oil and rubber producer’s enlarged equity capital is available to fund managers.
IHH Healthcare Bhd., Asia’s largest Hospital operator, has secured investors including AIA Group Ltd. and Government of Singapore Investment Corp. for its $2 billion initial share sale in Kuala Lumpur, two other people familiar with the matter said today, declining to be named as the information was private.
State-owned Felda Global was the world’s third-largest oil palm plantation operator in 2011, according to Frost & Sullivan Inc. The company is attempting Malaysia’s biggest IPO since 2010, as researcher Oil World forecasts palm oil exports will rise to a record in the 2011-2012 season that started in October. Gas Malaysia Bhd. (GMB) jumped 10 percent on its first day of trading in Kuala Lumpur yesterday.
“I haven’t seen an IPO garner so much excitement in a long, long time,” Abdul Jalil Abdul Rasheed, who helps manage $3 billion as chief executive officer at Aberdeen Islamic Asset Management Sdn., said of the Felda Global sale.
Even with Felda and IHH Healthcare, the value of IPOs in Southeast Asia will trail the $9.7 billion raised in the region in last year’s first half, data compiled by Bloomberg show. Yet the decline will be less steep than in Hong Kong, where the value of IPOs has tumbled 89 percent.
In the past month, Graff Diamonds Corp., China Yongda Automobiles Services Holdings Ltd. and China Nonferrous Mining Corp. shelved IPOs in Hong Kong that might have raised a combined $1.7 billion. Southeast Asia hasn’t been immune either: Formula One, owner of the world’s biggest auto-racing series, last month postponed a plan to raise as much as $3 billion in Singapore. Chief Executive Officer Bernie Ecclestone said the IPO will still take place this year.
Economic growth in Southeast Asia may accelerate to 5.2 percent this year from 4.6 percent in 2011 amid a recovery in Thailand, according to an April forecast by the Asian Development Bank.
In Indonesia, Southeast Asia’s largest economy, growth has topped 6 percent for six straight quarters as investments in industries such as mining increased. While Malaysia’s expansion slowed to 4.7 percent in the first three months from 5.2 percent the previous quarter, central bank Governor Zeti Akhtar Aziz said June 7 that “very robust” consumption and private investment will support the economy.
At the same time, China and India are losing steam. China cut borrowing costs on June 7 for the first time in three years after five straight quarters of slowing growth. India’s expansion has eased to almost a decade-low.
“At this point in time when people are generally more concerned about China, you’re not likely to get much of a deal flow from Hong Kong,” said Lee King Fuei, Singapore-based fund manager at Schroders Plc, which oversees about $326 billion. “In Southeast Asia, there’s more diversity in economies and government policies.”
Tesco Lotus Deal
The 133 companies that went public in Southeast Asia since the start of 2011 have fallen an average 5.1 percent from their offer prices, compared with a 10.4 percent drop for IPOs worldwide and a 9.6 percent decline for the rest of the Asia- Pacific region, according to Bloomberg data weighted by deal size. In Hong Kong, new stocks lost an average of 13 percent in the same period.
Thailand, whose economy was ravaged in 2011 by the worst floods in almost 70 years, boasts the largest IPO completed so far in 2012 in the Asia-Pacific region. Tesco Lotus Retail Growth Freehold & Leasehold Property Fund (TLGF), controlled by Tesco Plc’s Thai unit, raised 18.4 billion baht ($580 million) in March in the country’s biggest IPO since 2006.
In second place is a Philippine deal: GT Capital Holdings Inc., owned by billionaire George Ty, raised 18.8 billion pesos ($435 million) in April in that country’s fourth-largest IPO ever. Tesco Lotus shares have advanced 18 percent since its IPO, while GT Capital is up 5.7 percent from its offer price.
“Despite a slowdown in equity markets elsewhere around the region, we expect to see continued activity in the Southeast Asian IPO markets for the remainder of the year,” said Ashok Pandit, co-head of Asia equity capital markets at Deutsche Bank AG, the No.1 underwriter of Southeast Asian IPOs last year according to Bloomberg data.
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