Published September 23, 2008

M'sia IPO scene slowest in 20 yrs

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(KUALA LUMPUR) Malaysia is probably headed for its slowest initial public offering (IPO) market in almost 20 years, as a weak stock market takes its toll on fund-raising efforts, Malaysia's Business Times reported.

Eighteen companies carried out IPOs so far this year. If the numbers stay at current levels, it would be the slowest since 1989 when 13 companies raised funds from initial share sales, Bursa Malaysia data showed.

The stock market has lost 29 per cent so far this year, the third worst performer among South-east Asian markets.

Malaysia is not alone as global markets have faltered in reaction to the demise of major US financial institutions such as Lehman Brothers and Merrill Lynch.

'It has been slow this year. Even some of the big boys are not doing a single IPO so far this year,' said an investment bank executive.

Bursa Malaysia had targeted for some 30 IPOs this year but had also conceded as far back as May that this is not likely to be reached.

However, there are companies applying for listing approvals from the Securities Commission, a source from a regulatory body said.

'The important thing is for these companies to get approvals first. Then, they can delay the listing if they want to,' the source said.



This is crucial because if a company delays its listing request submission, its financial numbers could change and affect its eligibility.

One major IPO that is eagerly awaited is UMW Holdings Bhd's oil and gas business. The unit, which would have a market value upwards of RM1.5 billion (S$638.5 million), was approved for an IPO on March 31 this year.

UMW was supposed to list the business by Sept 30, but won a six-month extension. Its new deadline is March 31 next year.

A weak demand for IPOs is not just bad for the companies looking to raise funds, but could also affect investment banks that underwrite the deals.

Typically, investment banks provide insurance for companies by agreeing to buy shares that are not taken up by investors in IPOs.

In a weak market, banks could end up holding the unsubscribed shares, becoming shareholders of the IPO companies.

One recent case was Vastalux Energy Bhd, an oil and gas services provider. Only 6 per cent of its public issue was taken up, leaving the rest for its underwriters.

Vastalux had signed underwriting deals with KAF Investment Bank Bhd and TA Securities Holdings Bhd.