Najib Victory Expected to Open Malaysia’s IPO Pipeline

Billions of dollars in initial public offerings are expected to move forward now that Malaysia’s national election is over, as the country seeks to retain its crown as Southeast Asia’s top IPO market.

Malaysian Prime Minister Najib Razak’s National Front Coalition won a majority of parliamentary seats on Sunday, which should enable him to press ahead with a series of ambitious reforms to accelerate economic growth and deepen the country’s financial markets. The victory also clears away any political uncertainty.

“Malaysia is one of the favorite destinations for investors who have the mandate to invest in Southeast Asia.

Fundraising activity is expected to pick up now the election is out of the way,” said Jeff Zajowski J.P. Morgan's JPM -1.06% head of equity capital markets for Asia Pacific.

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“There’s been strong investor demand and offerings had been delayed by the election.”

Among the deals seen moving forward are two expected to raise around US$1 billion each–the planned IPO of Westports Bhd., partly owned by Hong Kong tycoon Li Ka-shing, and that of power company Malakoff Corp.

Other deals in the works include a US$500 million offering by industrial conglomerate UMW Holding’s Bhd., and an IPO by Iskandar Waterfront Holdings Sdn., a real estate developer focused on Malaysia’s southern Johor state, that is expected to raise up to US$300 million.

Malaysia currently ranks fifth in Southeast Asia in IPOs by deal value so far this year, down from first last year, when it ranked fifth globally, according to data provider Dealogic.

In 2012, companies there raised nearly US$12 billion, defying the somber mood that saw Motor Sport franchise Formula One Group pull a US$2.5 billion offering planned for Singapore and Graff Diamonds Corp. scrap a US$1 billion deal planned in Hong Kong.

Last year’s big deals in Malaysia included a US$3.2 billion IPO by Felda Global Ventures Holdings Bhd. 5222.KU +4.49%, a government-owned palm oil plantation company, and a US$2 billion offering by health care company IHH Healthcare Bhd. 5225.KU +4.00%, which was linked to sovereign wealth fund Khazanah Nasional Bhd.

Malaysia’s IPO market has received strong support from government-linked pension funds such as the Employees Provident Fund and the Islamic Pilgrim’s Fund, who generally hold the shares for a long time.

Mr. Najib has said that his government was committed to deepening the capital markets and would push for more state-owned units to list.

Investors cheered his victory on Monday. The Kuala Lumpur Composite Index, or KLCI, rose as much as 6.7% after the election results were released. Malaysia’s benchmark index has lagged behind its Southeast Asian peers this year. The KLCI is now up 3.8% this year, while the Philippines’s has gained more than 20% and Indonesia’s nearly 14%.

Mr. Najib’s election victory may enable him to push through his ambitious $444 billion Economic Transformation Program, which is aimed at lifting Malaysia to the ranks of wealthier neighbor Singapore by 2020, partly by speeding up the approval of big infrastructure projects that promise fast economic gains.

Political uncertainty has weighed on Malaysia’s stock market for several months, but investors will now look forward to ETP infrastructure projects proceeding, said Shireen Muhiudeen, managing director at Corston-Smith Asset Management, which has around  600 million ringgit (US$202 million) in assets under management in Southeast Asia.

“Companies, will continue to tap IPOs for risk capital,” helping Malaysia’s retain its status as Southeast Asia’s top IPO market, she said.

(Source: The Wall Street Journal)