Southeast Asian startups, faced with limited local funding, often turn to U.S. markets, illustrated by PropertyGuru’s struggles since its IPO. With low daily trading volumes compared to U.S. exchanges, regional capital markets must evolve to encourage local investments and foster robust growth. Initiatives to enhance regional cooperation and asset management will be critical in leveraging Southeast Asia’s high savings rate to support its startups and attract international investments.
Southeast Asian startups are increasingly seeking financial opportunities in the U.S. due to limited capital availability in their home region. A prominent case is PropertyGuru, Southeast Asia’s leading property technology entity, which went public on the New York Stock Exchange in 2022 through a SPAC merger. However, by early 2024, its shares experienced a significant decline, losing 60% of their value, culminating in a buyout by EQT at a valuation below its original listing. This scenario highlights the challenges faced by Southeast Asian companies in attracting international investment and underscores a broader issue: the low trading volumes in Southeast Asia’s capital markets compared to the robust liquidity in U.S. markets. As many Southeast Asian companies have demonstrated, the allure of U.S. listings has not translated into long-term success; these firms struggle with post-IPO performance, and median share prices on the Nasdaq for Southeast Asian companies have plummeted by 80%. The primary reason for this phenomenon is the overall low trading volumes in Southeast Asia’s key exchanges, which average around $5 billion daily, in stark contrast to the $200 billion on the Nasdaq and NYSE. To overcome these obstacles, Southeast Asia needs a more integrated regional capital market. Initiatives like the collaboration between the Stock Exchange of Thailand and Singapore Exchange are promising but require further development. There is an abundance of savings in the region; these funds should be effectively channeled into a diverse range of investment opportunities, fostering an active market that supports the growth of local startups. Active asset management is vital for channeling these resources efficiently. Evidence from India and Sweden reveals that consistent domestic investment can create robust financial markets. India has successfully encouraged regular investments through Systematic Investment Plans (SIP), while Sweden enjoys a thriving market buoyed by retail investor participation. Furthermore, regulators in Southeast Asia can facilitate growth by offering favorable tax structures for public listings, improving investor access, and increasing research transparency regarding local companies. Developing an environment that nurtures local innovation and attracts international investors will be crucial for the region’s economic future.
Southeast Asia’s startups, historically reliant on external markets, particularly the U.S., for funding are encountering significant challenges in the wake of underwhelming performances post-initial public offerings (IPOs). Despite having strong market positions, companies like PropertyGuru have seen dramatic drops in their stock value, prompting discussions about the sustainability of pursuing U.S. listings. This situation accentuates the need for improved regional investment mechanisms to foster local capital growth, ensuring that innovative firms can thrive without solely depending on foreign markets. While the region possesses a high savings rate, the lack of robust capital market integration limits investment opportunities. Advances in regional cooperation among exchanges and better asset management strategies are necessary for cultivating liquidity and attracting both domestic and foreign funds.
In conclusion, Southeast Asian startups face significant hurdles when trying to secure funding, often turning to U.S. markets which expose them to high volatility and diminished investor interest. Strengthening regional capital markets through improved liquidity, active asset management, and regulatory support is essential for creating a self-sustaining funding environment. By mobilizing local savings and fostering robust investment ecosystems, Southeast Asia can empower its innovative startups, enhancing their competitiveness globally and establishing a resilient economic future.
Original Source: fortune.com
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