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Thursday, February 2, 2023

South Korean IPO pipeline dries up on worries about world progress

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Initial public choices in South Korea have slowed to a trickle after a report 12 months in 2021, as investor sentiment cools over issues about excessive inflation, slowing world progress and the battle in Ukraine.

At least 10 Korean corporations have referred to as off listings this 12 months, together with app market One Store, Hyundai Engineering and cyber safety enterprise SK Shieldus.

The corporations cited difficulties in acquiring the valuations they needed as the principle motive for the withdrawals, as market sentiment has soured and the benchmark Kospi has fallen 12 per cent this 12 months.

The final large Korean IPO was LG Energy Solution, the world’s second-largest electrical automobile battery maker, which raised $10.6bn in January.

One Store cancelled its itemizing this month after failing to attract sufficient institutional investor demand, with its competitiveness in opposition to world rivals reminiscent of Apple’s App Store and the Google Play Store referred to as into query.

“Many institutional investors positively saw our fundamentals like our growth potential, profitability and stability, but investor sentiment has weakened substantially in recent months because of the growing macroeconomic uncertainty,” the corporate mentioned.

SK Shieldus had aimed to boost as much as Won1tn but additionally cancelled its IPO plan this month as a consequence of weak institutional investor curiosity. In late January, Hyundai Engineering, a building unit of Hyundai Motor Group, scrapped its $1bn itemizing after it did not receive the lofty valuation it needed.

“Investor response was not satisfactory because of poor market conditions,” mentioned an investor relations official at Hyundai Engineering. “We are not sure when to revive the IPO.”

The IPO freeze is in sharp distinction to final 12 months, when 89 corporations raised a complete of Won19.7tn ($15.7bn) in new listings, in accordance with the Financial Supervisory Service. Seventeen of them greater than doubled on their buying and selling debuts, with the Kospi hitting all-time highs, pushed by robust demand from retail buyers.

But the run of offers prompted regulators to step up scrutiny of excessive valuations amid concern over market bubbles.

Monetary tightening can be taking a toll on inventory markets, with rising financial uncertainty weighing on sentiment.

Companies which have gone public this 12 months have underperformed, with 11 Korean corporations out of 36 to checklist this 12 months buying and selling beneath their IPO costs.

“Global investors increased their exposure to Korea last year but are now pulling out of emerging markets as they prefer safe haven assets,” mentioned an funding banker.

“Companies will have to rethink their IPO timing as pricing is what matters for them,” mentioned Hwang Se-woon, an analyst at Korea Capital Market Institute. “This bearish mood is likely to continue until next year as market liquidity dwindles and valuations continue to fall.”

Source: www.ft.com

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