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IPO game pivoting towards China a good omen for Malaysia

05/08/2020 04:55 PM

By Nurul Hanis Izmir

KUALA LUMPUR, Aug 5  -- As tensions between the United States (US) and China continue to blaze with popular video app TikTok being dragged into the fray, Alipay's unit Ant Group has made the decision for a dual initial public offering (IPO) in Hong Kong and Shanghai instead of in the US.

It is a move that economists believe would reinvigorate investors’ interest in Asian equity markets.

International investors have year-to-date took out US$56.6 billion (US$1=RM4.20) net of equities from Asian markets, namely South Korea, Taiwan, India, the Philippines, Malaysia, Indonesia and Thailand.

Of this amount, Malaysia has so far recorded a foreign net outflow of RM18.6 billion in 2020, Bank Islam Malaysia Bhd economist Adam Mohamed Rahim told Bernama.

“Therefore, such fundraising plans in Asia could attract foreign investors not just to China but also other Asian markets such as Malaysia,” he said.

Fintech behemoth Ant Group is attempting the world’s largest-ever IPO, to raise US$30 billion (in Shanghai and Hong Kong) likely by October, according to Chinese media.

Founded by billionaire Jack Ma, the Hangzhou-based Alibaba affiliate is one of the world’s most valuable startups. However, unlike e-commerce giant Alibaba Group Holding Ltd, which chose to be listed on the New York Stock Exchange in 2014, Ant is moving to list closer to home.

And if all goes well, the listing would be the largest IPO ever, surpassing oil giant Saudi Aramco’s US$29.4 billion IPO about half a year ago.

Adam said that in terms of equity investments, Singapore-based iFast Financial Pte Ltd, which operates, launched online platform FSMOne in 2016 to offer US and Hong Kong-listed securities to investors, including Malaysians.

“This has enabled Malaysians to invest in Hong Kong’s equity market.

“Moreover, Hong Kong is the only place in the world at the moment that has a unique arrangement whereby investors can place orders for China A-shares (shares of mainland China-based companies that trade on the two Chinese stock exchanges, the Shanghai Stock Exchange and the Shenzhen Stock Exchange) through brokers based in Hong Kong”.


IPO shines spotlight on Asia, US bypassed


IQI Global chief economist Shan Saeed said the market had now moved to Hong Kong and Shanghai, with Shanghai becoming the next global financial hub in Asia-Pacific.

“The strength of Shanghai and the stronger investors will overshadow Hong Kong and Singapore. Investors will be looking more towards Asia-Pacific.

“Malaysia, given its strong presence and strategic location in the Belt and Road Initiative, will woo more Chinese investors to invest in the country over the long run with the East Coast Rail Link (ECRL) being one of the hubs,” he said.

Explaining further, Shan said China was investing in making Malaysia its port of call, including via the Digital Free Trade Zone, and Chinese companies were keen to invest heavily in the country, mainly in the Straits of Malacca.

“It is a good omen for Malaysians because investors are looking at China. So once they look at China, they would look at ASEAN and Malaysia is the gateway for the Chinese trade route.

“This (the IPO) will further boost Asia’s image and if Malaysian companies were to go for IPOs, this will continue to be a good point for the local businesses. Chinese investors are currently holding about US$2.3 trillion fund globally,” he stressed.

Shan added that investors were looking for a country with stable macroeconomic policies and outlook, the necessary infrastructure as well as a productive labour force.

“Malaysia fortunately falls under this category,” he opined.


New IPOs for local companies anytime soon?


Pandemic-related counters like those in the healthcare sector on Bursa Malaysia saw their share prices surge in the past few months since the start of the outbreak.

Top Glove shares, for example, skyrocketed 400 per cent this year, with analysts predicting more gains for the rubber glove maker. This is despite the snag involving the detention order by the US Customs and Border Protection.

Affin Hwang Capital Research even foresees the company’s market capitalisation surpassing Southeast Asia’s largest bank, DBS Group Ltd, with share price likely to breach the RM100 mark should investors ascribe a higher valuation on the world’s largest glove maker.

When asked if the company was taking advantage of the optimistic glove bull run to spread its wings and head for another IPO in Shanghai or Hong Kong, managing director Kim Meow Lee said the company had studied the option to list in Hong Kong a few years ago.

“We didn’t proceed as we felt it was better for us to be dual listed in Singapore, which is also a reputable financial centre. Top Glove has no intention at the moment (for another listing),” he said.

 So far this year, Top Glove’s ranking by market cap has jumped 31 places, from 34th to the third-largest in Malaysia.

Top Glove, which is secondary listed on the Singapore Exchange, is now the 10th-largest company in the island nation, with a market cap of S$22.66 billion (S$1=RM3.07).

Top Glove has so far skipped past 41 companies, from 51st position at the start of 2020.

The rubber glove maker was also listed on the Dow Jones Sustainability Emerging Markets Index in September 2019 in recognition of its sustainability practices. It ranked 15th out of 44 healthcare companies.

Top Glove fell 12 sen to RM28.24 at 4:28 pm, with 15.90 million shares transacted.


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