Southeast Asia's Run Isn't Done

Booming IPO markets, with Thailand leading the pack, show no signs of cooling

From the local 7-Eleven convenience store chain in Thailand to Singapore's national post office, Southeast Asia is producing a bumper crop of initial public offerings. So far this year, 114 companies of all shapes and sizes have raised $3 billion from the region's sizzling markets by promising investors fast growth and steady profits. Take AKN Messaging Technologies. The Malaysian cell-phone software producer netted $2.6 million when it listed on Jan. 1. Since then its stock has soared 919%. "The timing was quite good," says Managing Director Lim Seng Boon.

There are few signs the bull market in IPOs will cool anytime soon. In Thailand, public offerings now in the pipeline are expected to raise $1.7 billion by yearend, according to J.P. Morgan Chase & Co. (JPM ), on top of the $1.2 billion companies have already raised through 14 IPOs, making Thailand the region's leader. The total would equal 3% of the Thai market's current $90 billion capitalization. Malaysia is hot on Thailand's heels with $676 million from 45 IPOs. "We're catching up," says Nazir Razak, chief executive of leading Malaysian bank CIMB. It underwrote 10 IPOs this year, including the largest so far -- a $408 million deal for the Astro pay-TV network. CIMB itself went public in January, raising $60 million.


Why the sudden fervor? Investors are bullish about the prospects for corporate earnings in Southeast Asia, where growth is being led by rising domestic consumption. Plus, balance sheets are healthier. In Thailand the average net debt-to-equity ratio at publicly traded companies is 1:1, a big improvement from 4:1 back in 1996. While soaring debt loads and overvalued currencies helped tip the region into financial crisis a few years ago, investors have put that behind them. In U.S. dollar terms, Thailand's bourse is up 104% since Jan. 1, and even Indonesia's exchange, the region's most volatile, is up 58%. Some say there's still upside potential. "It's a year or two too early to talk about a bubble," says Sriyan Pietersz, head of research at J.P. Morgan Securities Thailand in Bangkok. "The markets have changed since the crisis."

Skeptics believe the rally is overdone and that few newly listed companies are good long-term bets. "There's very little of quality that we'd be absolutely comfortable with," says Hugh Young, managing director of Aberdeen Asset Management Asia Ltd. in Singapore. "The markets should pause for breath and let reality catch up."

Another wave of public offerings is expected over the next several months as state-owned enterprises are privatized. It helps that countries like Malaysia and Thailand create obstacles for local investors who want to buy foreign securities. But captive or not, investors are making it harder for corporate execs in Southeast Asia to resist taking their companies public.

By Michael Shari in Singapore

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