Election Uncertainty Slows Indonesia’s IPO Market

Election Uncertainty Slows Indonesia’s IPO Market, But Stock Market and Renewable Energy Show Promise

• Year-over-year (YOY), the Americas and EMEIA regions recorded double-digit growth by both number and proceeds in the first three quarters
• Indonesia's IPO market declined in Q3 2024, mainly due to the recent general election and the formation of a new government. However, the stock market surged in September, fueled by interest rate cuts from Bank Indonesia and the Federal Reserve
• Asia-Pacific's Q3 rebound contributed to an 11% quarter-over-quarter (QOQ) increase in global IPO numbers, despite a 12% drop in proceeds; Asean saw 28 IPOs with proceeds totaling USD 1.1 billion in Q3
• IPO pipelines highlight EMEIA's sector diversity and ongoing global interest in AI

JAKARTA, 10 October 2024. Amid a global economic slowdown, market volatility, geopolitical shifts and monetary easing, the global IPO market in Q3 2024 has shown signs of cautious optimism. Despite a dip in year-over-year (YOY) volumes by 14% to 310 IPOs and proceeds by 35% to USD 24.9 billion, Q3 did modestly outpace the first two quarters of 2024 in IPO launches.

Navigating through a complex economic and geopolitical landscape, marked by the start of a global interest rate easing cycle, Q3's IPO activity has contended with heightened market volatility. Despite these challenges, the Americas and EMEIA demonstrated resilience in the first three quarters of 2024, with EMEIA's IPO proceeds up by 45% compared to the same period last year, helping to mitigate the global market's overall downturn. These findings are detailed in the EY Global IPO Trends Q3 2024 report.

The persistently lower private equity and venture capital (PE and VC) exit activity over recent years has created a growing backlog of portfolio companies poised for monetization. A resurgence in PE-backed mega IPOs and VC-backed unicorns iws taking shape, as current valuation levels become more favorable for launching mature, high-value portfolio companies into the public market. In the first nine months of 2024, PE and VC-backed IPOs made up six of the top 10 global IPOs, accounting for over one-third of the total global IPO proceeds. In the Americas, these IPOs accounted for 52% of the total proceeds, underscoring a greater willingness among PE and VC firms to exit in the current IPO landscape.

Cross-border listings have also seen a significant uptick. In the first three quarters of this year, 77 companies chose to list abroad, up from 64 in the same period last year, a 20% YOY increase. Since 2023, foreign-domiciled issuers have represented approximately 52% of IPOs on US exchanges, reaching a 20-year high. Concurrently, with a contrasting stock market performance between the US and China this year, the market value gap between the two countries has reached a record high in Q3.

Indonesia’s IPO Market Slows Amid Election Uncertainty, Stock Market Rallies

Indonesia's IPO market experienced a slowdown in the first 3 quarters of 2024, recording 34 IPOs that raised a total of USD 300 million. This performance is significantly lower compared to the same period in the previous year, which saw 66 IPOs raising a total of USD 3.3 billion. Moreover, Indonesia's IPO proceeds as of Q3-2024 were also lower than those of neighboring countries like Malaysia (USD 1.4 billion) and Thailand (USD 0.6 billion). 

Reuben Tirtawidjaja, EY Indonesia Strategy and Transactions Partner states:

“The slowdown can be primarily attributed to the general election earlier this year and investors’ anticipation of the establishment of a new government in October 2024. This will affect decisions around IPOs as investors exercise increased caution, with many preferring to adopt a wait and see approach regarding the forthcoming government's policies before making investment decisions.

Despite the IPO slowdown, the Indonesia Stock Exchange (IDX) Composite Index, or IHSG, experienced a quite significant upswing from IDR 7,139 in early July to a peak of IDR 7,905 in mid-September 2024. This surge was fueled by Bank Indonesia's 25-basis-point interest rate cut to 6% in mid-September 2024. In addition, the Federal Reserve also reduced its interest rate by 50-basis-point during the same period, while another interest rate cut is expected in November 2024, which could provide further positive sentiment for the Indonesian capital market.“

Renewable Energy IPOs Gain Momentum Amid Indonesia’s Push for Net Zero Emissions

Going forward, renewable energy may be one of the sectors to look out for given the growing market interest in the sector, which has witnessed several IPOs in the last five years, including the successful public listing of PT Kencana Energi Lestari Tbk, PT. Arkora Hydro Tbk, PT Pertamina Geothermal Energy Tbk, and PT Barito Renewables Energy Tbk.

Reuben, adds:

“While the number of renewable energy IPOs may not be particularly impressive, the share prices of these companies have increased at least 30% as of 30 September 2024 since their initial offering, indicating robust investor interest. In light of Indonesia's commitment to achieve net zero emissions by 2060 and the anticipated favorable policies from the new government towards the renewables industry, it is expected that more renewable energy companies will pursue IPOs in the coming years.”

Americas and EMEIA Rally as Asia-Pacific Stabilizes

Year-to-date (YTD), the Americas and EMEIA have shown double-digit growth by both deal number and proceeds compared to the same period last year, despite a global reduction in public offerings owing to the Asia-Pacific’s IPO pause in the first half of the year. The US and India have notably maintained high levels of IPO activity, even during a typically quieter quarter. India launched more than 100 IPOs in Q3, marking its highest level of public offerings in a single quarter over two decades.

Asia-Pacific has made a notable turnaround in the third quarter. By overcoming earlier declines, the region has contributed to an 11% QOQ increase in global IPO numbers. This rebound, marked by increased activity in mainland China, Indonesia, Malaysia and South Korea, has injected confidence into the global market during a period of heightened uncertainty.

YTD 2024, Asean saw a total of 94 IPOs raising USD 2.5 billion, down from 127 IPOs raising USD 4.9 billion. In Q3 2024 alone, there were 28 IPOs with proceeds totaling USD 1.1 billion, representing a surge in proceeds of 100% from the previous quarter that saw 29 deals totaling USD 0.6 billion. This was primarily driven by the prominent listing of 99 Speed Mart Retail Holdings Bhd. from Malaysia, which stood as the second-largest IPO in the region in YTD 2024. Across Asean, other active exchanges in YTD 2024 include Indonesia (34 IPOs raising USD 0.3 billion), Thailand (22 IPOs raising USD 0.6 billion), Philippines (3 IPOs raising USD 0.2 billion). Singapore and Sri Lanka each had one IPO that raised USD 19.5 million and USD 1.5 million respectively.  

Chan Yew Kiang, EY Asean IPO Leader, says: 
“With interest rates easing and companies gearing up for growth in the region, IPO activities are expected to pick up in the next quarter and year ahead. Strong fundamentals and demands, together with regulators increasingly exploring policies to support growth companies to tap the capital markets for growth, also bodes well for the markets. We should also expect growing interest in cross-border listings as companies seek to achieve brand equity in other markets that they are venturing into.”  

AI Companies Attract Investor Interest 

Over the past two years, more than 60 artificial intelligence (AI) companies have gone public annually, with about half turning a profit. Approximately 50 AI companies are currently in IPO registration, demonstrating sustained investor interest in AI-driven innovations.

Q4 2024 IPO Market Outlook

The remainder of 2024 is expected to see the IPO market influenced by central bank policies, geopolitical developments and key election outcomes. Optimism is fueled by lower interest rates and easing inflation, which are likely to encourage new listings and a resurgence in sectors sensitive to borrowing costs. Strong performance in key markets such as the US, Europe and India is expected to support IPO activity. Cross-border listings should continue to thrive, and significant public debuts, especially those backed by PE firms and from spin-offs and carve-outs, are anticipated as they seek favorable public entry points.

George Chan, EY Global IPO Leader, says:

"Investors are gearing up for a more volatile second half of 2024. As inflation and interest rates recede, other emerging factors are taking precedence in influencing IPO decisions. In this environment of heightened uncertainty, well-timed market entries and compelling equity narratives are crucial for businesses looking to capitalize on IPO opportunities."

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About the data

The data presented here is available on ey.com/ipo/trends. Q3 2024 refers to the third quarter of 2024 and covers completed IPOs from 1 July to 16 September 2024, plus expected IPOs by 30 September 2024 (forecasted as of 16 September 2024). Q3 2023 refers to the third quarter of 2023 and covers completed IPOs from 1 July to 30 September 2023. Q1-Q3 2024 refers to the first nine months of 2024 and covers completed IPOs from 1 January 2024 to 16 September 2024, plus expected IPOs by 30 September 2024 (forecasted as of 16 September 2024). Q1-Q3 2023 refers to the first nine months of 2023 and covers completed IPOs from 1 January 2023 to 30 September 2023. All data contained in this document is sourced from Dealogic, S&P Capital IQ, Mergermarket, Oxford Economics, Refinitiv, Pitchbook and EY analysis unless otherwise noted. The Dealogic data in this report are under license by ION. ION retains and reserves all rights in such data. SPAC data are excluded from all data in this report, except where indicated.