The IPO market in Southeast Asia has sharply declined in the first half of the year, but companies in the AI sector could revive it.

View of the urban landscapeBangkokThailand, provided by Primeimages | E+ | Getty Images. The initial public offering (IPO) market in Southeast Asia experienced a sharp decline in the first half of 2024, and according to a Deloitte report, market capitalization decreased by71%, having composed5.8 billion dollarsThe region has experienced only67 initial public offerings of sharesduring this period, what about21.2%less compared to similar time frames in 2023. The amount of funds raised during these IPOs has decreased by59.4%compared to last year and amounted to1.38 billion dollars.

In the first six months, there were no successful IPOs recorded, with only one deal reaching a valuation above.one billion dollarsand collected more200 million dollarsWhile in the same period last year there were three major IPOs, each of which attracted more than600 million dollarsThis continues the negative trend that began in the second half of 2022, according to Deloitte data.

The decline in IPOs signals a "suppressed market sentiment," where both investors and companies planning initial public offerings continue to take macroeconomic factors into account. However, the report notes that historically, the second half of the year "usually shows better results" during the period from 2020 to 2022.

Expectations in the field of IPOs in artificial intelligence

A significant wave of IPOs in the field of artificial intelligence (AI) is expected in the coming years, leading to innovations and new opportunities in the market, experts suggest.

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Despite optimistic growth forecasts and increasing volumes of foreign direct investment in Southeast Asia, prolonged geopolitical instability and high interest rates remain key factors affecting market conditions and investor sentiment. According to Tay Hwee Ling, head of the accounting and reporting group at Deloitte in Southeast Asia, high interest rates may persist into 2024 as governments continue to combat inflation.

In the current market situation, investors prefer "proven profitability and stable cash flows" rather than models focused on unlimited growth, which were popular from 2020 to 2022.

The state of IPOs in Indonesia

It's interesting thatIndonesiashowed the largest decline among all Southeast Asian countries. According to Deloitte analysts, "Indonesia, which led the military IPO charts in 2023, faced a noticeable drop in the first half of 2024 as investors and IPO candidates opted for a wait-and-see strategy, considering the presidential elections in February 2024 and anticipating new economic initiatives."

The market capitalization of Indonesian placements has collapsed to92.2%and composed1.22 billion dollarsfrom January to June.
The total amount of funds raised through IPOs has decreased by89.1%to248 million dollarscompared to last year.
The number of placements inIndonesiain the first half of the year decreased to25with44a year earlier, which means a decrease of43.2%.

Although the IPO market in Southeast Asia seems to be in a state of depression in 2024, there is a cautious optimism that conditions may improve after this year, claims Tai. According to him, a decrease in interest rates is expected, which could open up new opportunities for launching investment trusts in the sector.real estateREITs and IPOs of companies involved in artificial intelligence may also emerge in the market, as many of these companies are in the early stages of their development.

According to Tai's statement, "we expect a significant wave of IPOs in the AI sector that will attract funds to the primary markets in the coming years, creating new opportunities and innovations."

It is also worth noting that the information provided has been updated following clarification from Deloitte that the amount of funds raised through the IPO in the first half of 2024 was1.376 billion dollarsIn the first half of 2023, it reached3.392 billion dollarswhat led to the decline in59.4%on an annual basis.