Malaysia is set to vault ahead of Hong Kong as Asia’s largest market for international initial public offerings with the planned flotation of shares in two massive government-linked companies defying a gloomy global listings environment.
The IPOs, by palm oil plantation operator Felda and Integrated Healthcare Holdings one ofAsia’s largest hospital operators, are proceeding thanks to strong backing from cash-rich Malaysian pension funds, according to analysts.
Combined, the IPOs are expected to raise as much as $5.2 billion.
Felda Global Ventures priced the bulk of its planned $3.2 billion initial public offering at 4.55 ringgit ($1.42) a share, near the top of an indicative range. Two people familiar with the deal said the institutional tranche was 45 times subscribed, with a much smaller retail tranche three times subscribed. The retail allocation was priced at 4.46 ringgit.
Felda, which is the second largest palm oil plantation operator after Sime Darby by land under ownership, would be the world’s second largest IPO after Facebook's.
However unlike other recent global IPOs of similar size most of the shares have been allocated to a line-up of “cornerstone” investors and large domestic institutional investors, which advisers say should ensure its success.
Dealogic figures for IPOs by exchange in Asia show that the addition of Felda and IHH would propel Bursa Malaysia ahead of the Hong Kong exchange as Asia’s largest market for international listings by value.
Hong Kong has raised $1.4 billion via 20 IPOs so far this year, according to Dealogic, a fraction of the tens of billions raised in each of the past several years.
“In contrast to the current lull in global IPOs, the Malaysian market is a bright spot,” ANZ analysts said.
Both issues also have secured over a dozen “cornerstone” investors between them, including BlackRock , Och-Ziff Capital Management , insurance group AIA , and sovereign wealth funds in Qatar and Singapore.
IHH is the healthcare unit of Khazanah, Malaysia's state investment agency, and has assets including Turkish hospital group Acibadem, Singapore’s Parkway Holdings and India’s Apollo Hospitals .
It is expected to raise about $2 billion in a listing due late next month.
The Kuala Lumpur exchange has seen $327 million raised so far this year in five IPOs. If plans for a third large Malaysian IPO are included – the roughly $1.5 billion float by cable television company Astro All Asia Networks, expected in the fourth quarter – Malaysia is on course to raise $6.7 billion this year, ANZ said.
The listings of both Felda and IHH, which is to be dual listed in Kuala Lumpur and Singapore, are part of plans by the government of prime minister Najib Razak to privatize government-linked companies that are not deemed strategic.
The Malaysian government is selling down its stake to about 40 percent, with some 78 percent of the issue allocated to domestic investors including thousands of lower-income farmers ahead of an election widely expected to be called within months.
Christopher Wong, senior investment manager at Aberdeen Asset Management in Singapore, said: “The elections are just around the corner and that’s creating a bit of a frenzy in the market which is good for Malaysia. It’s been quite defensive when [global] markets have been volatile.”
So far this year, Malaysia has had 47 listings that have raised $1.9 billion compared with $1.5 billion raised in 37 deals over the same period last year, Dealogic said.
By contrast, worries over the eurozone crisis andslowing Chinese and Indian growth have clouded the macroeconomic picture, causing the IPO window to slam shut.
Manchester United is drawing up plans to shift its proposed initial public offering from Singapore to the U.S., according to people close to the situation, while Formula One is also set to make a formal decision to delay its much-vaunted IPO in Singapore. Last month, Graff Diamonds pulled its planned $1 billion Hong Kong listing.