Capital raising activity could return to pre-pandemic levels in 2021, Maybank Investment Bank says

KUALA LUMPUR (April 19): Malaysia’s capital market activity is set to improve in 2021, with interest in fundraising in some sectors showing a return to pre-pandemic levels, a said Fad’l Mohamed, CEO of Maybank Investment Bank.

“In equity capital markets, we are seeing a significant increase in interest from first-time issuers (IPOs) in three categories: companies that have profited from the pandemic, such as gloves and health-related companies; companies that have weathered the pandemic well and shown resilience, such as finance and fintech companies, and companies that were initially affected by the pandemic but then recovered at a faster rate than planned, such as logistics and some real estate players, ”he said in a statement today.

He added that the trend from 2020 in terms of primary and secondary placements as well as block trades will continue as issuers seek to fund their recovery momentum and inorganic growth opportunities (in the case of primary placements). while large shareholders seek to recycle capital through secondary placements or block transactions.

In debt capital markets, he expects activity to match pre-pandemic activity, although corporate fundraising is currently focusing more on refinancing and infrastructure, rather than building new capacities.

“Malaysia’s bond and sukuk markets have been heavily tapped for infrastructure projects in recent years and we expect this trend to continue in 2021.

“With the global move towards clean energy and net zero emissions, there is increased demand and interest in green infrastructure,” he said.

He noted that Maybank is the market leader for large-scale solar PV projects in the capital market, having hosted 54% of all solar sukuk emissions from 2017 to 2019.

“We have also provided around RM 2.7 billion in funding for green energy projects. The recent awards for the Fourth Large-Scale Solar Program (LSS4) pave the way for more green finance and investment opportunities, ”he said.

Also active in the debt market are fundraising by the financial industry sector, including fundraising by banking groups in a difficult credit environment, he added.

In addition, he expects a good chunk of maturities to be refinanced this year, as companies take advantage of the relatively low interest rate environment to continue to expand their liabilities, although the appeal has some appeal. decreased little in the last three months compared to 2020, when yields were at an all-time low.

In mergers and acquisitions (M&A), he said, increased activity can be expected as confidence returns to the market and companies continue their quest for scale and consolidation in the country.

“We are seeing greater activity in companies whose valuations have been impacted by the challenges of 2020 but whose underlying activity remains strong, particularly in the retail sector. These are opportunities for shareholders to consolidate and reorganize [their] companies.

“Mergers and acquisitions are also likely to be driven by current trends of private equity investors seeking to monetize their investments and multinational companies revising the scale of their operations,” he said.

He also noted that the ongoing pandemic over the past 12 months has demonstrated the resilience of Malaysia’s capital markets, which will continue to remain broad and deep enough to support capital raising activities.

According to Fad’l, the successful completion of the RM1.5 billion IPO by Mr DIY Group (M) Bhd, which continued to perform well in the secondary market with the active participation of investors. institutional, and the strong bonds and the sukuk volume of RM 104 billion seen in 2020 provide a lot of comfort that there is still plenty of liquidity in the market.

“The low interest rate environment continues to support domestic liquidity, as do privatization deals that put money back in the hands of minority investors. While bond yields have risen sharply over the past three months, they are still below the average yield of the past 10 years, ”he said.

He added that funds are still available and growing while demand for sustainable returns remains strong.

Our observation corroborates with the just released Securities Commission annual report, which pointed out that the total funds invested in Malaysia by licensed fund management companies increased from RM620.1 billion at the end of 2019 to RM 649.5 billion at the end of 2020, despite the impact of the pandemic, ”he said.

Barring unforeseen events such as a new wave of infections, vaccine hiccups or political uncertainty, he expects capital market activity to return to healthy levels as all sectors of the world economy are moving forward to rebuild and recover.