Taiwan’s initial public offering (IPO) activity contracted significantly this year and might remain soft next year as firms prefer listings elsewhere, despite bullish markets and lower IPO costs in Taiwan, international consulting firm Ernst & Young said on Wednesday.
Only 12 companies await IPO review at the Taiwan Stock Exchange (TWSE) for next year, while 17 await review at the Taipei Exchange (TPEX), compared with this year’s 17 and 20 deals respectively, Ernst & Young managing partner Lin Tu (涂嘉玲) said.
The figures suggest a lack of enthusiasm among firms, although Taiwan’s economy is expected to grow at a similar pace next year and local bourses are to remain vibrant, Tu said.
IPO and underwriting costs are much lower in Taiwan, compared with those in Hong Kong or China, where many Taiwanese firms keep business operations, but Taiwan’s strict IPO requirements and a growing trend on the part of firms to list subsidiaries where their operations are located account for the nation’s sluggish IPO activity, she said.
Hong Kong is more business friendly and allows companies without revenue to file IPO applications as long as they are financially accountable and transparent, she said.
“It is not uncommon for emerging business ventures to go through such a stage before turning a profit. Investors could find them attractive as long as they have sufficient knowledge about their investment targets,” Tu said.
Most IPO candidates are in the technology, biotech and industry sectors, while some are in the cultural and creative industry and others are engaged in environmental protection, the Ernst & Young report found.
As of Dec. 12, the 17 IPO deals on the TWSE this year raised NT$8.31 billion (US$278.49 million) in capital and the 20 deals at the TPEX raised NT$5.49 billion, the report said.
They translated into a steep decline in both the number of deals and capital raised, even though the TAIEX has remained above 10,000 points since May.
The rallies are not broad-based, but are driven mainly by foreign funds, leaving local investors numb about wealth benefits, Ernst & Young Taiwan CEO Andrew Fuh (傅文芳) said.
Local bourses might receive support due to excessive liquidity, low borrowing costs and regulatory easing, Ernst & Young said.
Financial officials have encouraged local life insurance companies to increase stakes in local shares and promised to give favorable consideration to pleas for easier listing requirements.
The Ministry of Finance has indicated plans to extend the tax cut on daily stock trading.
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