Asia Capital Markets Research

It has not been the best year so far for Hong Kong’s IPO market, in a stark reversal from its strong performance in the earlier days of the pandemic. Battered by a confluence of unfortunate factors, from the city’s erstwhile zero-Covid policy to China’s tech crackdown to inflation and rising interest rates, the Hong Kong IPO market has thus far raised just US$7.77 billion, the lowest amount since 2013. While there are signs of a revival in the market, particularly with the imminent listing of two Chinese electric vehicle makers, the road to recovery remains long.

Rakuten wants to build a digital services ecosystem that stretches well beyond the e-commerce business for which it is best known and includes telecoms and digital financial services. With that in mind, the Japanese online shopping giant plans to list both its online securities and digital banking units relatively soon. However, market conditions are suboptimal to say the least, while investors are increasingly skeptical about Rakuten’s costly efforts to build a mobile network to compete against powerful incumbents SoftBank and NTT DoCoMo.

Indonesia has big plans for its capital markets, among the best performing in Asia this year. Through August 5, 34 companies had listed on the Indonesia Stock Exchange (IDX), raising a total of 20.1 trillion rupiah. By the end of the third quarter, Indonesia plans to launch a new economy board to attract more unicorns. Further, by the end of the year, it plans to roll out a dedicated cryptocurrency bourse. 

The Singapore Exchange has long been quiet compared to other prominent bourses in Asia, from Hong Kong to Shanghai, Tokyo to Mumbai. We might call it a sleeper – provided that it has adequate potential to awake. In 2021, fundraising on SGX fell 50% to $565 million, a six-year low, with just eight listings, according to Refintiv.

Platform companies have not had the best 2022, especially loss-making ones based in Southeast Asia. Amid global economic jitters, investors are souring on inflated tech valuations and stocks. We had thought Indonesia’s GoTo, with its laser focus on its massive home market and strong fundamentals, might be able to buck this trend, and at first it seemed the company might do just that. After all, its IPO was successful. But in recent weeks, the company’s share price has plummeted, mirroring the trajectories of its peers like Sea Group, Grab, Alibaba and Paytm.

Heading into GoTo’s IPO Monday, one could be forgiven for being a bit skeptical. Here was another loss-making platform company with a sky-high valuation and a lot of subsidy-driven digital services. If you’ve seen one, you’ve seen them all, right? Not necessarily, say investors. GoTo raised US$1.1 billion in a triumphant IPO on the Indonesia Stock Exchange. Shares rose up to 23% and closed the day 13% higher at 382 rupiah, valuing the firm at about US$31.5 billion.

Hong Kong’s IPO market has likely hit a nadir, with funds raised from new share listings plummeting 90% year-on-year in the first quarter. Just 11 companies went public on the Hong Kong Stock Exchange in the January-March period, raising a total of US$1.72 billion. It was HKEX’s worst performance since the first quarter of 2013.

Remember that SPAC boom in the U.S.? To be sure, it has slowed in recent months, but the Nasdaq and NYSE continue to attract some high-profile listings by special purpose acquisition companies, such as Grab’s December debut. It is a different story in Asia. Though Asian exchanges amended regulations last year to wave the way for SPACs, there have not been any blockbusters yet.

Why now? That is the question many analysts and investors are pondering as Indonesian platform company GoTo is pushing ahead with an IPO that seeks to raise up to US$1 billion at a US$30 billion valuation despite the poor performance of loss-making companies' shares in recent months. Like its Singaporean counterpart Grab, GoTo began as an Asian answer to Uber but has morphed into a super app leaning heavily on digital financial services to secure its future. And like Grab, GoTo has yet to turn a profit, spends heavily subsidizing users, and made investors wait a long time for an exit.

Amid a general digital finance boom in Indonesia, the nascent retail investing segment is growing fast. A proliferation of investment apps, usually with low minimum investments, is allowing a much greater proportion of the population to invest. Historically, the wealthy have dominated the country’s stock market. Indonesia’s newbie investors are not only interested in equities though; they are also increasingly keen on crypto. Many of Indonesia’ new retail investors are young people, with about 70% between the ages of 17 and 30, according to Indonesia’s central securities depository.

Page 1 of 5