IPO activity in SG spikes as capital shifts to SEA amidst global geopolitical tensions

Initial public offering (IPO) activity in Singapore has improved in the first half of 2022 compared to the same period last year. According to Deloitte’s mid-year report for the Singapore IPO capital market, the first half of this year saw nine IPOs, raising SG$572 million in proceeds which contributed to a total IPO market capitalisation of SG$790 million. This represents a 70% increase in proceeds compared to that raised from the three IPOs in the first half of 2021, which saw a total of SG$337 million in proceeds raised and an IPO market capitalisation of SG$1.1 billion. 

Fast-growing companies remain attracted to the Singapore Exchange as a listing venue for growth and capital raising, the report found, with the first half of 2022 seeing six Catalist listings. This surpasses the whole of 2021, which had five Catalist listings, and outperforms each of the previous five half-year periods, which saw four or fewer Catalist listings. 

Darren Ng, disruptive events advisory deputy leader, Deloitte Singapore forecasts that more capital will shift to SEA, owing to geopolitical tensions, fear of aggressive rate hikes in the US and Europe, China’s crackdown on US-listed companies, as well as supply chain disruptions. According to Ng, these factors could set the stage for more IPOs, dual or secondary listings on the Singapore IPO capital market.  

However, increased volatility and uncertainty in markets have resulted in a wider pricing mismatch in terms of valuation expectation between investors and companies, causing some companies to temporarily hold back their IPO plans, as companies wish to avoid undervaluation while investors wish to avoid post-listing share price turbulence.  

"Tech startups in SEA have been growing remarkably, and we see a wave of SEA unicorns going to the US for a listing in search of better liquidity and valuation. This phenomenon may help SGX’s secondary listing market breathe new life, with SEA companies listed in the US looking to move closer to home to tap into wider investors familiar with their brands in Asia and benefiting from extended trading hours by trading on more than one exchange with different time zones,” Ng explained. 

Meanwhile, the report found that despite the absence of real estate investment trusts (REITs) or business trusts (Trusts) listings since the start of the pandemic, this category remains the most significant type of listings on SGX. Since 2018 and in spite of the pandemic, REIT or Trust listings raised SG$5.1 billion in proceeds and contributed SG$7.9 billion to the IPO market capitalisation, representing 73% of the total funds raised and 54% of the IPO market capitalisation in the last four and a half years. 

According to the report, strong governance and regulatory framework, international investor base and activity, diverse offerings, efficient tax regime, political stability and vibrant secondary capital market are key reasons that make Singapore the preferred listing destination for REITs or Trusts. 

Tay Hwee Ling, disruptive events advisory leader, Deloitte Southeast Asia and Singapore also forecasts that managers of foreign assets will continue to find Singapore an attractive destination for a REIT listing, given the city-state’s track record as the REIT hub of Asia and its continued improvements to renew the competitive advantages for S-REITs.   As of 29 June 2022, Singapore has 44 listed S-REITs, among which 89% have at least some properties or assets outside of Singapore.  

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