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23 companies line up for IPO amid global economic slowdown, bearish market

Posted by on 04 Oktober 2019

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Unfavorable global economic conditions have not seemed to deter companies from entering the country’s stock market, with some having announced their plans to list their shares on the Indonesia Stock Exchange (IDX) later this year.

According to data obtained by The Jakarta Post Thursday, last week 23 companies have formally informed the IDX of their plans to conduct initial public offerings (IPOs) before the end of the year.

Among the companies in the IPO pipeline are cloud advertising startup PT Digital Mediatama Maxima, online digital lending platform operator PT Bank Amar Indonesia and property firm PT Harvest Time.

If all of these companies realize their IPO plans this year, the bourse would see a total of 61 newly listed companies throughout this year. At least 38 companies had floated their shares on the exchange as of September.

The figure was close to the bourse’s target of 75 new listings this year, which also include bonds and collective investment instrument issuances with real estate investment trusts (REITs), exchange traded funds (ETFs), asset-backed securitizations and infrastructure funds (DINFRA).

“We’re confident that we can reach our target of 75 listings this year,” I Gede Nyoman Yetna, the IDX’s assessment director, told the press in Jakarta last week. He added that the companies’ interest in seeking funding from the public showed they remained confident in the local stock exchange despite a wave student protests and sluggish economic growth – factors that could undermine the government under President Joko “Jokowi” Widodo.

Anugerah Mega Investama director Hans Kwee said on Monday that the current global economic conditions made it so that going public was a challenge for the companies.

With the current bearish market, they fear the shares offered in the IPO would not absorbed by the market, he said.

The Jakarta Composite Index (JCI) has been on the decline in the past several days amid widespread demonstrations conducted by students in several parts of the country and signs of a weakening economy.

“The current bearish market is quite challenging for the listings,” he told the Post.

Like in the previous listings, the companies that will float shares mostly comprise medium sized companies, which intend to raise funds of below Rp 1 trillion. Digital Mediatama, for example, is seeking Rp 726.3 billion (US$51.09 million) from its upcoming IPO, while metal and mineral processing firm PT Trinitan Metals and Minerals would get Rp 100 billion in fresh funds from its public offering.

Artha Sekuritas analyst Frederik Rasali told the Post that big companies were reluctant to go public because investors preferred to invest their money in safer instruments given the stock market’s unfavorable conditions.

“Big companies see it is not the right time now to conduct an IPO. With the current market conditions, they will not be able to sell their shares at a premium price,” he said.

Meanwhile, the prices of shares of four state banks fell sharply at the close of trading on Wednesday amid fears over an increase in the amount of their bad debts.

Bank Mandiri saw the biggest drop in shares with a 5.43 percent decline, followed by Bank Negara Indonesia (BNI) with a 4.81 percent decline, Bank Rakyat Indonesia (BRI) with a 3.44 percent decline and Bank Tabungan Negara (BTN) with a 2.78 percent decline.

Their performances contributed to the fall in the JCI, which dropped 1.35 percent at 6,055.42 at the close of trading.

The sharp fall in state banks' shares occurred following the release of Moody's Investors Service report on its stress tests on Asian banks.

According to the stress test, banks in India and Indonesia are most prone to a deterioration in corporate debt repayment capacity, followed by banks in Singapore, Malaysia and China.

The stress test was based on an assumption of a 25 percent decline in earnings before interest, tax, depreciation and amortization (EBITDA).