(Bloomberg) — Indonesia is proving to be a treasure trove for IPOs amid an ongoing global slowdown, outperforming several other major listing venues in terms of total funds raised in the first quarter. And bankers say there’s more to come.
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The Southeast Asian market saw IPO proceeds of $1.45 billion between January and March, the highest ever in the first quarter and almost double Hong Kong’s. Indonesia’s total also surpassed Tokyo and London’s, and at least two other bids, each worth over $500 million, are expected in early April. IPO proceeds are down more than 60% year over year globally and in Asia Pacific.
Jakarta has benefited from listing state-owned companies to reduce their dependence on the federal budget. As Southeast Asia’s largest economy seeks to integrate into the global electric vehicle supply chain, companies are also capitalizing on investor interest in the sector. However, demand for local offerings will be tested as Chinese tech giants led by Alibaba Group Holding Ltd. prepare to list their units in Hong Kong.
“Indonesia remains a focus market and we want to do more transactions there,” said Sunil Khaitan, head of equity capital markets for Southeast Asia at Bank of America Corp. in Singapore. The bank is working on about five more debuts over the next two to three quarters, he said.
Some of the much-anticipated deals to come include PT Pertamina Hulu Energi, a unit of state oil giant PT Pertamina, and palm oil producer Palm Co., a subsidiary of PT Perkebunan Nusantara III. PT Pertamina also earlier offered shares of PT Pertamina Geothermal Energy to raise $604 million in one of the world’s largest deals of the year.
The story goes on
One of the sectors that is attracting investors’ attention is the battery space for electric vehicles. Indonesia’s vast reserves of nickel — a key component in electric vehicle batteries — have helped automakers like Hyundai Motor Co. and Mitsubishi Motors Corp. prompted to set up local plants to ensure continuity of supply as the country bans ore exports.
Interest in the nickel industry, which is at the heart of President Joko Widodo’s vision to develop an end-to-end onshore electric vehicle supply chain, has helped manufacturers achieve the highest price for their IPOs. Metals and mining company PT Trimegah Bangun Persada raised $659 million in March, Indonesia’s largest bid in over a year. The company, also known as Harita Nickel, had the first EV-related IPO in Jakarta.
Meanwhile, another manufacturer, PT Merdeka Battery Materials, is taking orders through April 4 for a bid of up to $637 million. It is scheduled to debut on April 18th.
“The EV theme remains strong, I think it’s one of the bright spots for equity markets right now,” said Udhay Furtado, co-head of ECM, Asia Pacific at Citigroup Inc market come from this sector.”
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Hong Kong
While the IPO scene in Indonesia is promising, the market may soon fall behind Hong Kong, which should be boosted by some sizeable transactions.
Cainiao Network Technology Co., the logistics arm of Alibaba Group Holding Ltd., has begun preparations with banks for a bid in Hong Kong, Bloomberg News reported last week. Two units of JD.com Inc. also filed for initial public offerings on Thursday.
READ: Alibaba spinoff plans bring hope to Hong Kong’s tepid IPO market
Another problem is the weakness of the Indonesian secondary market. The benchmark Jakarta Composite Index is down 0.7% this year, lagging the broader Asian benchmark after being among the world’s top performers in 2022. Pertamina Geothermal’s more than 20% decline since its debut in late February has been uninspiring.
Given the current volatile market conditions, investors may “adjust their risk appetite accordingly,” said Gioshia Ralie, senior country officer at JPMorgan Chase & Co. in Indonesia.
READ: Tough Times for the Once-Totally Hot Indonesian Market: Taking Stock
Still, companies continue to prepare for IPOs, and bankers expect a stream of mid- to large-size offerings throughout the year as foreign investors look for new markets and themes.
“We’re definitely seeing new investors that have never looked at Southeast Asia, never looked at Indonesia, come out and be like, ‘Okay, let’s play this,'” Bank of America’s Khaitan said. Future offerings should “actually attract a lot more international participation.”
–Assisted by Calvin Ho, Julia Fioretti and Yudith Ho.
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