KUALA LUMPUR: Better prospects for the local bourse in 2024 will foster a more conducive environment for initial public offerings this year, especially from among small and medium enterprises.

Mohd Sedek Jantan, the head of wealth research and advisory and designated portfolio manager at UOB Kay Hian Wealth Advisors, said Bursa Malaysia’s barometer index is anticipated to perform positively this year, projecting the FBM KLCI to reach 1,605 points.

He noted that the Malaysian stock market displayed a positive trajectory in the first quarter of 2024 with the FBM KLCI ending at 1,536.07, up 5.6%. An upward trend was sustained throughout the quarter, with the index reaching its peak at 1,558, underpinned by a resilient domestic economy and effective policy implementation.

Other key factors driving this growth included appealing valuations, high dividend yields, and a depreciation in ringgit, which attracted additional investments.

“The correlation between initial public offerings and market indices can be intricate. Generally, positive market indices, indicative of investor confidence and economic health, can foster a conducive environment for IPOs,” he told Bernama.

He said that given the market's anticipation of forthcoming rate cuts, the upward trajectory will likely persist.

“Small and mid-cap stocks may serve as indicators of growth or value,” he continued. “However, it's important to note that the IPO performance is influenced not only by broader market conditions but also by individual company prospects and macroeconomic factors at the time of the IPO.”

Therefore, Mohd Sedek said, companies which want to do an IPO must be prepared to navigate through transient market windows and potential shifts in valuations, adding that the post-listing performance will serve as a crucial gauge of success.

He said that despite a subdued market in the first quarter, Malaysia and Indonesia remain prominent destinations for IPO issuers in the region. Nine IPOs were listed on Bursa Malaysia, comprising eight in the ACE Market and Prolintas Infra Business Trust in the Main Market.

Overall, the Asean region saw 38 IPOs, raising US$1 billion (RM4.7 billion). This marked a decline of 27% in the number of IPOs and a 31% fall in proceeds.

Mohd Sedek also reckons that the move to expedite to three months for new applications received from March 1 for the Main Market and the ACE Market demonstrates a strategic initiative to simplify and accelerate the listing process, which will have positive effects in multiple areas.

“This development is set to stimulate market activity, fostering increased investor confidence in the strength of our regulatory framework and market transparency. In addition, the accelerated approval process can help boost economic growth by making it easier for companies to access capital quickly,” he said.

This, in turn, allows them to pursue expansion projects, encourage innovation, and create more job opportunities.

“This initiative competitively positions Malaysia, potentially making it a preferred choice for companies considering public listings in the region.

“The simplification of IPO approvals creates a more dynamic and flexible capital market environment that promotes effective capital allocation and investment decision-making,” he added.

In 2023, IPO issuances improved to RM3.6 billion from 2022’s RM3.5 billion via the listing of 32 companies.

The FBM KLCI declined by 2.7% last year, ending at 1,454,66.