Indonesia Leads With Most IPOs In ASEAN: Q1 2020

Asia Blockchain Review
July 26, 2020

According to Bloomberg’s latest capital markets league table data, Indonesia saw 26 initial public offerings (IPOs) launched in the first four months of 2020, the most among exchanges in South East Asia.

This number compares to six in Singapore and eight in Malaysia. Despite the large number of IPOs launched, the equity capital market (IPOs and additional offerings) was relatively small in terms of value raised.

The average size of each offering was US$ 14 million, a 74% drop from the average offering size of US$ 55 million in the same period last year. A total of US$ 368 million was raised via the equity capital market from January through April 2020, compared to US$ 717 million in the same period last year.

By run rate, this will result in the lowest amount of equity capital raised in the last 10 years, since 2009. In the last five years, there have only been six additional equity offerings by Indonesian companies, (three in 2019 alone) which raised approximately US$ 1.1 billion.

“While our data shows that Indonesia has seen the largest number of IPOs this year so far, Indonesian companies still prefer to raise capital from the debt capital markets. In the first four months of 2020, US$ 18.9 billion of debt, such as bonds and syndicated loans, was raised in Indonesia, constituting 98.1% of total capital raised,” said Vatsan Sudersan, APAC Head of Global Data, Bloomberg.

84% of bonds issued by Indonesian companies are listed outside Indonesia, with Singapore being the preferred choice for listing. The volume of bonds (US$ 15.3 billion) more than doubled from January to April 2020, compared to the same period last year (US$ 7.2 billion).

“We see more Indonesian companies turning to the bond markets to raise capital partly due to the liquidity tightness among Indonesian local banks, in relation to their regional peers. The next few months will likely continue to be challenging for Indonesian companies as they grapple with the economic fall-out from COVID-19. Some data points that could give insights to investors in the upcoming earnings season would be the Loan-to-Deposit ratios of local banks along with the provisions for loan losses and non-performing loans,” Sudersan added.

Based on data compiled by Bloomberg, the Loan-to-Deposit (LDR) ratio of the five biggest Indonesian banks by total assets has increased each year over the last three years, from about 90% average in early 2017 to about 97% at the end of 2019. This compares to 92% for the comparable five banks in Malaysia and 88% for the three biggest banks in Singapore.

In the M&A space, activity continues to be buoyed by domestic deals. While deal count remained relatively stable compared to the same period last year, there has been a 61% year-on-year decrease in deal value, amounting to roughly US$ 2.9 Billion of deals in the first four months of 2020.

Deal activity in the financial sector were the most impacted, and witnessed a 93% decrease in volume compared to the same period last year. The largest deal involving an Indonesian company this year was the US$1.2 billion financing round for Gojek to support its pursuit for expansion to take on its competition.

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