Singapore's IPO market crashed 84% to $730m in 2018

This is significantly smaller compared to 2017’s $4.7b across 120 IPOs.

Singapore continued to fall short of Vietnam’s initial public offerings (IPOs) market which remains as Southeast Asia’s hottest capital market racking in 33 listings totaling $6.2b in 2018, according to professional services firm Deloitte.

Singapore’s capital market experienced a slowdown in 2018 with 15 listings totalling $730m. This represents a 84% fall from 2017’s $4.7b, according to Deloitte.

Also read: Singapore IPO proceeds plummet 85% to $715m

The Singapore stock market suffered heavy losses in 2018, with the IPOs share price performance falling in line with the 11% decline in the Straits Times Index (STI) on the back of increasing interest rates in the US, the escalating China-US trade war and the International Monetary Fund’s (IMF) warning of global financial stability risks.

“The property cooling measures by the Singapore government added to the negative impact on the stock market,” Deloitte added.

In 2018, 40% of the IPOs listed on the Singapore Exchange (SGX) had market capitalisations of above $100m each, of which half were Singapore-based companies. The top three in terms of fund raised in Singapore were investment holding firm Koufu Group with $74m, property developer SLP Development which clinched $55m and real estate agency PropNex with $60m.

“Singapore companies that listed on the SGX has higher funds raised and profitability than those listed overseas,” Deloitte observed, citing how the average funds raised by Singapore companies listed in Hong Kong stood at $18m per IPO, whilst the average funds raised by Singapore companies listed on the local bourse was $26m per IPO. Real estate listings accounted for 65% of the total amount raised on SGX in 2018 at $476.34m.

That being said, Deloitte noted how tides are shifting with more companies looking for opportunities in overseas exchange driven by either their desire to raise capital in markets they hope to expand into or a lack of confidence in their local markets’ ability to help them raise the funds they require to grow. “This is where the local bourses need to step up their game and educate their local companies on the benefits of listing locally,” Tay Hwee Ling, global IFRS & offerings leader at Deloitte Southeast Asia and Singapore, said in the report.

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In line with this, SGX opened a public consultation in January 2018 whether to retain listed companies’ required quarterly reporting (QR) as well as increase the market capitalisation threshold from $75m to $150m in a bid to attract more companies to list and provide a breather for small and mid-cap companies. As of December 2018 however, this is still in the proposal stage.

SGX also signed a new strategic cooperation agreement with China Singapore (Chongqing) Demonstration Initiative on Strategic Connectivity (CCI) Administration Bureau on 8 January 2019 to support Chongqing in catalysing business opportunities and access international capital funding for business expansion.

Meanwhile, the Monetary Authority of Singapore (MAS) announced its plans to launch a new $75m grant for Equity Market Singapore (GEMS) on 14 February in its efforts to enhance Singapore’s role as Asia’s centre for capital raising and enterprising financing. The three-year initiative aims to help enterprises raise capital through Singapore’s equity market, and will have three components including a listing grant, research talent development, and research initiatives grant.

Also read: MAS to launch $75m grant for Equity Market Singapore

“Depending on the stability of the global economy, we can expect the IPOs that have been delayed in 2018 to seek listing in Q1 of 2019, and potentially some IPOs from the real estate investment trusts (REITs) and also from the healthcare and food & beverage (F&B) sectors,” Tay noted. In April 2018, Malaysian clinic operator Qualitas Medical and Bangladesh firm Summit Power International delayed their respective IPOs on the back of market volatility, according to Bloomberg.

Whilst some deals in Singapore were struggling to lift off the ground, companies turned to the Vietnam bourse for their equity offerings.

Vietnam’s total IPO market capitalisation stood at $5.2b in 2017 before ballooning almost eight times to hit $41.4b in 2018. Of the top three blockbuster listings in Southeast Asia for 2018, two of these came from Vietnam. Vietnamese real estate develop Vinhomes Joint Stock Company (JSC) raised $3.6b on the Ho Chi Minh (HCM) Stock Exchange, whilst Vietnam Technological and Commercial Joint Stock Bank (TechComBank) raised $1.2b. Sliding into second place was Thailand Future Fund with $1.8b.

Vietnam’s strong performance in 2018 was attributed to the government’s ambitious privatisation drive and market reform plans, a solid gross domestic product (GDP) growth of 6.8% and strong interest from foreign investors and local funds, Deloitte highlighted.

“Many large state-owned enterprises (SOEs) were being divested, especially in the energy and resources industry, which contributed significantly to the high amount of funds raised,” the firm added in its report. “With the Vietnam Finance Ministry proposing to remove the 49% foreign ownership cap for listed companies, and the stock exchange streamlining the listing and IPO process, we can expect the Vietnam IPO market to continue to do well in the next few years.”

Also read: Vietnam overtakes Singapore in IPO fund market

But whilst Vietnam’s market performance is commendable,Tay told Singapore Business Review in an earlier interview that Vietnam’s number cannot be directly compared to Singapore. 

“It is not an apples to apples comparison,” Tay explained. “Singapore, as well as Hong Kong, are more mature economies and are in a different IPO cycle, having already gone through what Vietnam is experiencing now.”