Friday, June 15, 2012

Malaysia is now Asia's top IPO destination

Malaysia is now Asia's top IPO destination

HONG KONG: Believe it or not, Malaysia has just become Asia's top IPO destination in 2012.

Palm oil producer Felda priced its US$3.1 billion (RM9.88 billion) public offering near the top of its price range, making it the year's second-largest initial public offering (IPO) after Facebook.

That leaves Kuala Lumpur ahead of even China's bourses.

Felda's offering benefited from strong domestic demand. Excluding shares set aside for so-called cornerstone investors, demand from institutional investors was more than 30 times larger than the amount of shares on offer, IFR reported.

The IPO is set to deliver a US$500 million windfall to farmers in an election year. Felda is valued at about 14 times the company's 2012 earnings, hardly a stretch.

It's no accident that a Southeast Asian offering has succeeded in achieving a listing where others, like luxury group Graff Diamonds, recently failed.

The region's markets can tap robust and growing local demand for investments. Vietnam's benchmark index has risen 22 per cent this year, and the Philippines' index is up 16 per cent. Markets with significant foreign participation like Hong Kong have suffered.

Southeast Asia's economic fundamentals are also appealing.

Domestic demand is strong, and financial discipline has come a long way since the 1997 Asian crisis.

In Malaysia, consumption made up 48 per cent of gross domestic product (GDP) in 2010, from 44 per cent in 2000. Its total debt as a percentage of GDP has fallen from 45 per cent in 2000 to 34 per cent in 2010, according to the World Bank.

Foreign troubles may still weigh on Felda. As foreign participation rises, Southeast Asian markets may find them more subject to the whims of global market in the future. But for now, the region's investors appear to retain an appetite for IPOs.

Felda Global Ventures Holdings priced its IPO at RM4.55 a share on Wednesday, near the top of its indicative range.

The top exchange in terms of Asia IPO proceeds is China's Shenzhen ChiNext start-up market, which had raised US$3.4 billion, according to Thomson Reuters data. Reuters

Publish date: 15/06/12

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