KUALA LUMPUR: The recent wave of lacklustre initial public offerings (IPOs) on Bursa Malaysia is largely influenced by weak market sentiment and sector-specific headwinds, according to market experts.
Tradeview Capital fund manager Neoh Jia Man said despite many IPOs being heavily oversubscribed, some companies entered the market with less-than-attractive valuations.
"Strong demand during the IPO subscription period may generate initial optimism, but it does not always translate into positive performance after listing," he told Business Times.
He said institutional investors typically have better visibility on demand through the book-building process, while retail investors often operate with limited insights — even when the latter's allocation is oversubscribed.
Bursa Malaysia has seen a shift in IPO performance this year, from strong early gains to weaker showings in more recent listings, with 12 companies having made their market debut so far.
The first seven IPOs enjoyed strong momentum, with share prices rising between 8.33 per cent and a remarkable 98.86 per cent on their debut day, led by Oriental Kopi Holdings Bhd.
Swift Energy Technology Bhd also stood out, closing its first trading day 41.07 per cent higher.
However, sentiment has cooled significantly for IPOs listed since Feb 20, despite similarly strong subscription rates.
ES Sunlogy Bhd, the eighth IPO of the year, closed flat on its debut at the offer price, signaling the start of a declining trend among newly listed companies.
Following that, Pantech Global Bhd, Saliran Group Bhd and Lim Seong Hai Capital Bhd ended their first trading day in the red, closing down by 15.44 per cent, 22.22 per cent and 5.68 per cent respectively.
The latest casualty was Wawasan Dengkil Holdings Bhd, which debuted yesterday.
Shares of the earthworks and civil engineering firm opened at its IPO price of 25 sen but quickly slipped by six per cent, or 1.5 sen, to 23.5 sen.
The stock closed eight per cent lower at 23 sen, down two sen, with 38.95 million shares changing hands.
"Broader market conditions remain an accurate indicator of potential struggles. This subdued IPO trend is likely to persist unless domestic market conditions improve," said Neoh.
In light of this, he said companies and underwriters should consider offering a more attractive valuation discount or reducing the IPO float to improve price support in the secondary market.
MIDF Research head Imran Yasin said several factors could contribute to an IPO underperforming on its debut.
"Investor sectoral preferences and prevailing market conditions on the day of listing are two key factors we've observed influencing debut performance," he added.
Malacca Securities Sdn Bhd research head Loui Low noted that it is, in fact, rather irrational for investors to sell on the first day of listing when the stock is trading in negative territory or below its IPO price.
However, he explained that some investors may exit early to free up capital for other opportunities, even if it means cutting their positions amid unfavourable market conditions.
"Most of the underperforming IPOs were oversubscribed, so we believe this does not indicate weak demand. It is more likely that the market is experiencing a softer environment or low season for IPOs," he said.
On the broader market, Low said the outlook remains unfavourable, largely due to US President Donald Trump's ongoing tariff threats against trading partners.
"We expect that once the market adjusts to the volatility, overall conditions may begin to recover," he added.
Bursa Malaysia is set to welcome another new entrant this Friday, HI Mobility Bhd, which saw its public portion, priced at RM1.22 per share, oversubscribed by 6.57 times.
But in a market weighed down by weak sentiment and post-listing disappointments, one question lingers - will HI Mobility defy the trend, or become the next in a growing list of underwhelming IPOs?