Malaysia’s IPO Market Refuses to Slow Down

By Peter Pham - July 10, 2012 | Tickers: FB, EWM, NES.DL | 0 Comments

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Last week the Malaysian government’s palm oil giant Felda Global Holdings (FGV: MK) went public in the biggest successful IPO of the year, raking in more than $3.1 billion and rising with the KLCI Bursa Malaysia Index since then. 

Note I said biggest successful IPO.  Facebook’s (NASDAQ: FB) IPO can be considered many things, but successful is not one of them, unless you are a litigator.  And since Felda was the next biggest IPO of this year so far, it gets to claim that title.  Given the other news embroiling Morgan-Stanley (NYSE: MS) regarding their pressure on ratings agencies to oversell their SIVs, it would seem that muppet backlash from their involvement in the Facebook fiasco is the least of their worries currently. 

IHH Hospital Group bhd. is currently in the bid taking process for their IPO, which is reported to be as big as $2 billion US.  If the Ringgit keeps moving against the dollar the way it has since the E.U. Summit on June 28^th, up nearly 1.6%, then that number could easily go higher.  IHH will dual-list on both the Malaysian and Singaporean exchanges, now linked for cross-exchange trading regardless, which will increase both its exposure and potential liquidity.

Asian stocks tend to pay much higher dividends than western stocks do.  Dividend yields as high as 4% to 5% are common, especially in Malaysia and Singapore.  In Vietnam, there are many small and mid-cap companies trading at very low multiples with dividends yields that reach 12% in some quarters.  The dividends are tied to a percentage of the company’s earnings so they tend to be very volatile.  Dividends in the west tend to be more stable and viewed as passive income.

But the latest news from Malaysia is that near-monopoly cable and pay-TV provider Astro All Asia Television PLC has hired a who’s who of banks to handle their $1.5 billion IPO.  CIMB and Maybank will be the leads on the project, and a number of the top U.S. and Swiss banks will act as the global book runners. 

While Singapore’s major IPOs have all been postponed due to the situation in Europe (and coming soon to the U.S.), Malaysia’s state-owned corporations are equitizing on schedule and without fear.  Part of the reason for this is Malaysia’s insistence on insulating its economy from the E.U. and the U.S.  They have increased the amount of trade between themselves and the other ASEAN nations from 65% to 73% since 2006, while GDP has risen from $157 billion to $250 billion.

The KLCI Bursa Malaysia Index had its highest closing price on July 4 at 1614.43, breaching the all-time high of 1611.50, achieved on June 25. This is an index that has broken out into a potential major bull run on the news of increased liquidity from the major central banks.  The 1600 level provided significant resistance that has now been overcome.  A weekly close above 1611 would be a very strong confirmation of bulls being in control of the market.  Malaysia’s exchange is heavily weighted towards institutional investors, who comprised 73% of the value of shares traded in June, accumulating RM1 billion for the month. 

The surprise rate cut from China along with coordinated action by the Bank of England and the ECB bode well for the countries at the top of Southeast Asia.  The iShares MCSI Malaysia ETF (NYSEMKT: EWM) is within 2% of its all-time high, carrying a 3.7% yield, and has seen a 1.2% expansion in AUM since June 20^th.  While these IPO’s may not be added to the ETF directly for some time, they will have an effect on the KLCI Index which tracks the 30 largest companies in Malaysia, of which Felda is now one. 

If opposition leader Anwar Ibrihim’s party wins the elections coming up in the fall, this could be one of the biggest events in Malaysia’s history and bears scrutiny for intrigued investors. 

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