Mercury observes that IPO enthusiasm alone is no longer sufficient to sustain share price momentum
by RUPINDER SINGH
MALAYSIA’S recent IPO boom may be losing its shine as investors increasingly retreat from speculative trades and pivot toward quality-driven strategies.
Despite a surge in new listings on Bursa Malaysia, most debutants over the past six months are now trading below their offer prices, a clear signal that market sentiment has shifted toward caution.
This transformation is underscored by a recent thematic report by Mercury Securities Sdn Bhd, which observes that initial public offering (IPO) enthusiasm alone is no longer sufficient to sustain share price momentum.
Instead, the report highlights that a company’s fundamentals, scalability and alignment with macroeconomic themes are becoming the primary drivers of post-listing performance.
“While first-day performance has been generally positive, long-term price actions reveal a divergence that indicates a shift in the market risk appetite and sentiment dynamics,” Mercury stated in its report.
Between October 2024 and April 2025, a total of 42 companies were listed on Bursa Malaysia, comprising seven on the Main Market and 35 on the ACE Market.
While many of these companies delivered eye-catching first-day gains, the performance divergence since listing has been significant.
More than 70% of these IPOs are now trading below their IPO prices. “Strong first-day IPO performance should not be deemed a reliable indicator of sustained long-term outperformance, especially for companies that lack compelling growth drivers or robust fundamentals,” Mercury warned.
This bifurcation underscores a broader and more structural change in investor behaviour.
The market is no longer driven by IPO euphoria alone — today’s investors are making more informed and cautious decisions.
Among the handful of standout performers are companies that are closely aligned with structural growth trends and national policy priorities.
Elridge Energy Holdings Bhd, for example, has gained more than 90% since listing, buoyed by strong investor interest in clean energy and the policy tailwinds created by Malaysia’s National Energy Transition Roadmap.
Azam Jaya Bhd, a construction player with operations in Sabah, rose nearly 30% post-listing as investors bet on increased infrastructure spending by the federal government.
According to Mercury, “Azam Jaya’s strong post-listing performance has benefited from structural alignment with federal government spending priorities under the Government Budget, particularly in Sabah’s infrastructure space.”
Consumer-facing companies like Oriental Kopi Holdings Bhd, Life Water Bhd and 99 Speed Mart Retail Holdings Bhd also continue to attract investor interest due to their strong brand equity, recurring demand and earnings visibility.
“Companies operating within consumer products and services mostly outperformed their cyclical peers, reflecting a broader flight to quality and earnings visibility,” the report said.
On the other hand, the IPO market has been far less kind to companies operating in cyclical or low-margin sectors.
TMK Chemical Bhd, KHPT Holdings Bhd and Carlo Rino Group Bhd have each seen their shares fall sharply post-listing.
These declines highlight the market’s growing reluctance to assign premium valuations to businesses with opaque earnings, intense competition, or thin profitability.
“In such an environment, new listings face an uphill battle to attract sustained buying interest, particularly in the absence of strong fundamentals or compelling growth catalysts,” Mercury noted.
Another theme emerging from the recent IPO cycle is the growing significance of size and liquidity.
Mercury pointed out that companies with a market capitalisation above RM100 million have generally fared much better than smaller counterparts.
“Companies with a market capitalisation exceeding RM100 million have generally delivered stronger post-IPO returns, reinforcing the market’s preference for scale and liquidity,” the report stated.
Larger IPOs benefit from greater visibility among institutional investors, broader analyst coverage and deeper trading volumes.
Meanwhile, smaller listings continue to face structural disadvantages.
Sik Cheong Bhd, with a market cap of RM71.8 million, has seen its shares plunge 46.3% since listing, despite underlying fundamentals remaining intact.
“The stock’s struggle highlights the liquidity discount often applied to micro-cap names despite the fundamental strength of the company remain intact. This trend reinforces a broader theme: scale is becoming a proxy for investability,” said Mercury.
The macroeconomic climate has only added to the pressure.
IPOs that debuted in March and April 2025, amid heightened geopolitical tensions and signs of a global economic slowdown, recorded some of the weakest performances.
Saliran Group Bhd, MSB Global Group Bhd and Chemlite Innovation Bhd all registered lacklustre debuts and remain underwater.
“The ongoing trade tensions between the US and China, coupled with signs of a broad-based global economic slowdown, have driven markets into a more pronounced risk-off stance,” Mercury explained.
The brokerage added that this cautious stance is particularly evident in the performance of IPOs debuting during periods of heightened volatility.
Investors are clearly retreating from high-risk, unproven equities in favour of more defensive or liquid assets.
Looking ahead, Bursa Malaysia is targeting 60 new IPOs in 2025.
However, Mercury warned that the bar for success is now significantly higher.
“We believe IPOs backed by compelling valuations, strong fundamentals and credible growth trajectories are likely to continue to lead the market outperformance.”
Issuers looking to tap the public markets must now go beyond surface-level appeal.
They need to present a credible growth plan, demonstrate earnings clarity, and align with key macro or policy themes.
Investors are demanding more transparency, operational resilience and clarity on long-term value creation.
This new landscape marks a turning point for Malaysia’s capital markets.
The divergence in IPO performance signals a maturing investor base that is more focussed on durability than on speculative gains.
While the pace of new listings may remain strong, the market will likely reward only those that can withstand scrutiny beyond their prospectuses.
As Mercury aptly summarised: “IPO outperformance is now being driven by companies that offer clear visibility into earnings growth, are aligned with structural macro or policy tailwinds and operate in defensible sectors.”
The IPO frenzy may be cooling, but what emerges in its place could be far more enduring — a capital market ecosystem that rewards substance over sentiment, and sustainable value over short-term excitement.
- This article first appeared in The Malaysian Reserve weekly print edition
The post IPO euphoria wanes as investors prioritise fundamentals, liquidity appeared first on The Malaysian Reserve.
