2 December 2015
Slowing global growth dampens IPO fervour
Wong Siew Ying
Weak market sentiment and the slowing global economy have severely curtailed the number of initial public offerings (IPOs) this year.
There have been only 12 IPOs on the Catalist board of the Singapore Exchange (SGX), and none on the mainboard.
Consultancy Deloitte, which conducts an annual review of local listings, said at a briefing yesterday that it has "deep concerns" over the lack of mainboard listings.
"I think it is a concern that you don't have any mainboard listing in a year, and yet you want to develop into a strong capital market," said Dr Ernest Kan, chief of operations for clients and markets at Deloitte Singapore.
There are some signs of life, though. BHG Retail real estate investment trust (Reit) lodged its preliminary prospectus for a mainboard listing last week, with plans to raise about $394 million.
Dr Kan said there could be more deals next year if the macroeconomic conditions stay "under control".
The factors would include slowing growth in China, low commodity prices, impending interest rate hikes, terrorist threats and the performance of Singapore's economy.
The 12 IPO Catalist listings had a total market capitalisation of $1.49 billion as at Nov 30 and raised $237 million. This paled in comparison with the $3.45 billion raised from 29 deals in 2014, including 11 on the mainboard.
Dr Kan noted that five of the 12 IPOs in the first 11 months of this year qualified as mainboard candidates, with market capitalisations of more than $150 million.
But they "made an informed decision to list on the secondary board for perceived better market conditions", he added.
Deloitte said the SGX faces competition from other bourses. Kenon Holdings, for example, listed on Nasdaq in the US in January, while Netccentric and Stemcell United both listed on the Australian Securities Exchange this year.
The consultancy added that sectors such as consumer business and life science as well as healthcare dominated IPOs this year, a trend likely to continue into 2016.
DBS Bank, which is working on the BHG Retail listing, said the market is "definitely more stable now", compared with previous months.
Mr Tan Jeh Wuan, head of capital markets at DBS, told The Straits Times: "For next year, we have a decent pipeline so we are hopeful that market conditions will remain conducive, allowing us to launch some of the deals that we have been preparing for."
Deloitte said it has also seen an increase in the number of enquiries from small and medium-sized enterprises for both "onshore and offshore listings".
Still, a "perfect storm" of scenarios - such as high business costs, rising interest rates, slowing economic growth and cancellation of contracts, for example - could discourage firms from listing, said the Association of Small and Medium Enterprises (Asme).
"They may not want to push for an IPO when sentiment tends to be not too optimistic," Asme president Kurt Wee said.