The return of capital raising activity

PETALING JAYA: Malaysia’s capital market activity is set to improve in 2021, with fundraising in some sectors showing a return to pre-pandemic levels, Maybank Investment Bank said.

CEO Fad’l Mohamed said the investment bank has observed increased interest from first-time issuers or initial public offerings (IPOs) in three categories of the equity market.

These were companies that had benefited from the pandemic, such as gloves and healthcare-related companies, those that had weathered the pandemic well and demonstrated resilience, such as finance companies and fintech and businesses that were initially affected by the pandemic but had recovered. at a faster pace than expected, such as logistics and certain real estate players.

He said 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). and large shareholders seek to recycle capital via secondary. investments or blocks of transactions.

In the debt market, activity was expected to match pre-pandemic activity, although corporate fundraising focused on refinancing and infrastructure, rather than building new capacity.

Malaysia’s bond and sukuk markets have been heavily tapped for infrastructure projects in recent years and the trend is likely to continue in 2021.

With the global move towards clean energy and net zero emissions, there is increased demand and interest in green infrastructure, according to Fad’l.

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 or LSS4 have paved the way for more green financing and investment opportunities.

“Also active in the debt market, fundraising by the financial industry sector, including capital raising by banking groups in a difficult credit environment.

“We expect 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 waned somewhat over the past three years. last months compared to 2020 when yields were at a minimum level. historic low, “he noted.

Regarding mergers and acquisitions (M&A), Fad’l said increased activity could be expected due to the return of confidence in the market.

“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 distribution sector. These are opportunities for shareholders to consolidate and reorganize its activities.

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

“The ongoing pandemic over the past 12 months has demonstrated the resilience of Malaysian capital markets, which will continue to remain broad and deep to support capital raising activities,” he said.

The successful IPO of RM1.5bil by MR DIY Group (M) Bhd, which continued to perform well in the secondary market with active participation from foreign institutional investors, and the strong bonds and sukuk volume of RM 104 billion seen in 2020 provided evidence of abundant liquidity on the market.

Fad’l said the low interest rate environment continued to support domestic liquidity, as did privatization deals that put money back in the hands of minority investors.

Although bond yields have trended strongly upward over the past three months, they were still below the average yield of the past 10 years.

“Funds are still available and growing while the 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 649.5 billion RM at the end of 2020, despite the impact of the pandemic. .

“Barring unforeseen events such as a new wave of infections, vaccine hiccups or political uncertainty, we expect capital market activity to return to healthy levels as all sectors of the economy is moving forward to rebuild and recover, ”Fad’l said.