Asia’s Capital Market Needs a ‘Taylor Swift’ of IPOs to Catalyze Listings, Venture Capitalist Says
In an intriguing analogy, the call for a ‘Taylor Swift of IPOs’ in Asia has been echoed by industry experts as a necessary catalyst for invigorating the region’s burgeoning capital market. According to Jenny Lee, the founder and senior managing partner at Singapore-based venture capital firm Granite Asia, Asia’s market requires not just more listings, but an entire ecosystem of products, information, and adept fund managers.
The continent’s private sector is vast, with approximately 140,000 private companies generating annual revenues over $100 million. This dwarfs the number of public entities of similar financial stature, which stands at just 19,000. This disparity highlights a potential area of growth, yet reflects a market lackluster in incentives for going public unless capital or visibility are crucial.
The Asia IPO market, observed Lee, has had a tough 2024. Contributing factors include high interest rates and electoral uncertainties across major economies such as the U.S., China, and parts of Asia excluding Japan and India. In fact, the year saw a significant decline in IPO activities, with a 35% drop in deals and a 51% reduction in proceeds from the previous year, based on data provided by EY.
Nevertheless, specific bright spots persist. India led with an impressive 327 listings, topping the chart of major IPO markets. Japan and South Korea also demonstrated vigorous IPO activity, maintaining 84 and 75 listings respectively.
In the midst of this, Serena Tan, CEO and co-founder of the Malaysia-based Gaia Investment Partners, sees promise in the “high growth” sectors like health technology and preventive care within Asia. Looking at projections from the Asian Development Bank, it is estimated that about $2.3 trillion will be directed to healthcare services by 2026, a sector on the rise due to the aging demographic in the Asia-Pacific region.
Furthermore, Tan anticipates that Asian funds will garner $30 billion in private equity this year, with capital likely streaming into India and Japan. Yet, she stresses the importance of keeping an eye on China, as global dislocations such as leadership changes or technological advancements could present unique opportunities.
Private market assets, such as private equity and venture capital, offer an appealing investment avenue due to their steady long-term returns. According to Tan, these assets are less volatile compared to public markets and can provide an internal rate of return ranging from 10% to 20%, varying by strategy, geography, and industry. Investors keen on experiencing company growth cycles from private to public stages may find private markets particularly compelling.
Tan identifies further investment opportunities in Asia’s private equity space, notably within small and mid-market players spanning industries such as waste recycling and packaging material manufacturing.
As Asia’s capital markets evolve, it is clear that for a thriving public listing environment to emerge, a multifaceted approach championed by industry pioneers and echoed by prominent “star-like” IPOs could be essential in drawing momentum and enthusiasm across the region.
