Southeast Asia’s IPO market fell drastically in the first half, but AI listings could revive it

Southeast Asia’s IPO market declined significantly in the first six months of 2024, with market capitalization plunging 71% to $5.8 billion, a report from Deloitte showed.

The region saw only 67 initial public offerings in the first half, with that number falling by 21.2% compared to the same period a year ago. The amount raised from these IPOs dropped 53.3% year on year to $1.4 billion.

There were no blockbuster IPOs from January to June, with only one large IPO with market capitalization of more than $1 billion and raising more than $200 million, Deloitte said. In the same period a year ago, there were three large IPOs which raised more than $600 million each.

This marks a continued downward trend that began in the second half of 2022, according to Deloitte data.

The downward trend signals “subdued IPO market sentiments where investors and IPO candidates continue to navigate macroeconomic factors,” Deloitte said.

Still, the report pointed out that historically, the latter half of the year “has always been the better performing half between 2020 to 2022.”

“Despite a positive growth outlook and increasing foreign direct investment in Southeast Asia, the prolonged geopolitical instability and high interest rates environment have been the significant factors affecting the market conditions and investor sentiments in Southeast Asia,” said Tay Hwee Ling, Deloitte’s Southeast Asia accounting and reporting assurance leader.

High interest rates may persist in 2024 as governments address inflation concerns, Deloitte analysts warned.

Against this backdrop, investors geared toward “proven profitability and sustainable cash flows” instead of the growth-at-all-cost business model that many companies adopted from 2020 to 2022.

“Indonesia, which topped the 2023 [Southeast Asia] IPO charts, experienced a significant decline in the first half of 2024, as investors and IPO aspirants adopted a wait-and-see approach in light of the presidential elections in February 2024 and in anticipation of new economic policies,” Deloitte’s analysts said.

Market capitalization of Indonesian listings plunged 92.2% to $1.22 billion from January to June while IPO proceeds raised fell 89.1% to $248 million compared to a year ago. The number of Indonesian listings in the first six months of this year fell to 25 from 44 in the same period last year — down 43.2%.

“While Southeast Asia’s IPO market may appear subdued in 2024, there is cautious optimism that conditions will improve beyond 2024,” said Tay.

Tay said there is anticipation of lower interest rates ahead which could encourage the return of REIT [real estate investment trusts] listings, while artificial intelligence-related IPOs could hit the market in the near future as many AI companies are still in the early stages.

“We anticipate a significant wave of AI IPOs tapping on the IPO capital markets in the coming years, bringing innovation and new opportunities to the market,” Tay said.