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Asian IPOs are performing well in 2023 amid a slowdown in the global IPO market and fears of a worldwide recession. Rakuten Bank, Japan’s largest online lender, saw its stocks rise by 40% after the company made its trading debut on April 20. This comes at a time when global financial stocks are suffering after the failure of US banks.
A subsidiary of the Rakuten Group, the virtual bank raised a total of 83.3 bn yen (~$624m), making it Japan’s largest IPO in the last four years. Rakuten Bank’s stocks began trading for 1,400 yen (~$10.43) apiece on Friday at the Tokyo Stock Exchange. However, by day’s end, the price had increased to 1,930 yen (~$14.38).
Additionally, the interest of investors in Japanese banks is growing as SBI Sumishin Net Bank, which went public last month, has seen its stock price rise by 35.27% since its debut. “The outlook for Japanese banks in 2023 remains largely stable. In contrast to many of its global peers, the Japanese banking industry has higher accumulated levels of capital, lower ratios of nonperforming loans and a better base-case forecast for the economy,” said S&P Global.
Asian IPOs making strong debuts in the US
Asian IPOs from other countries are thriving too. On its debut day on the NASDAQ in New York, the shares of China’s EV startup U Power Ltd. increased by an astounding 640%. The startup, which develops battery-swapping technology for EVs, saw its share price jump as high as $75 from its IPO of $6 before closing at $43.18 on April 20.
As a result, the company’s debut stock performance surpassed that of all other firms that were listed in the US this year.
U Power Ltd. is a part of China’s EV sector, which sells half of all the EVs in the world. The rise in the stock value of the company is in line with a positive outlook for the Chinese EV sector, which is expected to grow at a CAGR of 14.18% to $323.60bn by 2027. However, after its bumper debut, the stocks of the EV startup have fallen by 81.87%.
Meanwhile, Singapore’s Multi Ways Holdings Ltd.’s shares soared by 553% on its trading debut in the US. It settled for a spike of 255% by the end of the trading day on April 3. This made it the second-best IPO in the US behind U Power in 2023. Since then, the stocks of the company are down by 0.17%.
Multi Ways is a supplier of heavy construction equipment to companies in Singapore, Australia, UAE, Maldives, Indonesia, and the Philippines. And it has been in the business for over 20 years. The initial excitement around the company’s equities might stem from the fact that, despite workforce shortages and rising construction prices, Singapore’s construction sector is predicted to grow by 2.1% to SGD 35,919m (~$2.40m) in 2023.
Along with this, the global market for construction equipment is projected to reach $161.99 bn by 2030, growing at a CAGR of 3.9%.
Meanwhile, in Indonesia, PT Trimegah Bangun Persada, popularly known as Harita Nickel, raised 10 tn rupiah (~$672m) in the country’s largest IPO this year. The company made its stock trading debut by offering about 8 billion shares at 1,250 rupiah (~$0.084) each. By the end of the trading day, the stock price rose by 4.4% to 1,305 rupiah (~$0.087). This coincides with nickel-rich Indonesia ramping up its aspirations to become a significant participant in the global EV market. The stock has risen 10.73% as of April 24.
“The national government has prioritised building the EV value chain while setting ambitious targets for EV production and usage. Indonesia aims to produce 600,000 EVs by 2030 and one million five years after, supported by its domestic supply of nickel, upgraded smelting infrastructure, and locally-produced EV batteries,” said ING in an insight.
Asian IPOs stand out
With Asian IPOs performing well, the Asia-Pacific market made up 59% of all global IPOs in the first three months of 2023, as per a report by Ernst & Young (EY).
IPO activity increased in Southeast Asia, from 29 IPOs raising $1 bn in Q1 of 2022 to 51 IPOs raising $1.4 bn in Q1 of 2023. Indonesia was the most active, with 30 IPOs raising $828 mn. Thailand finished in second with ten IPOs totalling $322 mn in proceeds. Also, Malaysia collected $238 mn from ten IPOs, while Singapore raised $15 mn from a single IPO.
This is in sharp contrast with the rest of the world, as global IPO deals shrank by 8% while proceeds from IPOs declined by 61% year on year in Q1 of 2023. During this period, the US IPO market saw 40 deals and $2.6bn in proceeds, up 11% and 9%, respectively, from last year. However, it is still below the levels witnessed over the last ten years.
Further, IPO deals in Europe, the Middle East, India, and Africa fell by 19%.
“Q1 was another down period amid interest rate rises, a lukewarm stock market, entrenched inflation and unexpected global banking industry turbulence. Despite this ongoing uncertainty around the economic and geopolitical environment, IPO pipeline continues to build and hope remains for a turnaround later this year,” says EY in its report.
“Businesses will need to navigate the high-cost and reduced liquidity environment for a little longer. Once there is evidence of a more stable market with higher certainty, investor confidence should return, and prominent companies that had postponed IPO plans may restart, albeit at more modest valuations,” opined Paul Go, EY Global IPO Leader in Asia-Pacific.
Editor’s Note: All stock data as of April 24, 2023.
