Last year, the world had to grapple with supply chain disruptions, interest rate hikes, rising inflation and an energy crisis.
While some of these issues are starting to taper off, discussions are now swinging between strong labour data and continued inflationary risks versus recessionary risks, rate pauses versus further rate hikes, and their effects on the global economy.
“Against a backdrop of ongoing global volatilities, Asean is likely to remain a bright spot amid intensifying headwinds as the region’s resilience is once more on display,” says group president and CEO of Maybank Khairussaleh Ramli at the opening of the Maybank Invest Asean 2023 conference on June 20 and 21.
With the theme “Asean reboot: Reimagining the future”, Maybank aims to help investors better navigate through today’s uncertainties amid current themes, building on the recovery from the pandemic.
In an interview with The Edge Singapore, Maybank Investment Banking group CEO Michael Oh-Lau says: “The turnout at the Maybank Invest Asean this year is proof that the market is indeed looking into Asean for opportunities and that the opportunities are well-timed.”
“Right now, valuations in the region are low. But those valuations won’t stay low. And this is where the opportunity comes in. There is some volatility today but I’m confident that the volatility will improve,” adds Oh-Lau, who joined the group in November 2022.
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With Maybank staying positive about the Asean economy, Khairussaleh believes businesses must be prepared to manage vulnerabilities and respond swiftly to new opportunities. He adds that Asean has been the net beneficiary of the rechannelling of trades and investments and the deepening of supply chains due to ongoing tensions between US and China.
“We are believers in the resilience of the region and Maybank is committed to enabling clients wherever they are and supporting the evolution of their businesses. As part of our M25+ strategy, we are investing up to RM4.5 billion ($1.3 billion) over five years to accelerate the development of new capabilities in technology and talent, including regionalising digital platforms, all underscored by customer-centricity and sustainability-first practices,” says Khairussaleh.
Sustainability push
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At the top of Maybank’s sustainability priorities is achieving carbon neutrality in Scope 1 and 2 emissions by 2030 and net-zero carbon by 2050 with plans already underway to achieve these targets. Likewise in Scope 3, which deals with financed emissions, Maybank is already working with key clients to support their decarbonisation journey. About 70% of Maybank group’s financed emissions come from fewer than 100 customers from top contributing sectors such as power and utilities, oil and gas, agriculture and construction.
“We see a clear Asean opportunity in the transition of these industries as they are key drivers of the region’s economies. The reshaping of their businesses will have far-reaching implications — new jobs, greener economies and transition pathways towards creating more equitable societies,” adds Khairussaleh.
In a bid to support clients in their transition to net zero, Maybank has also mobilised RM38.8 billion of sustainable financing cumulatively from 2021 to end-March and is well underway to achieve its RM80 billion target of sustainable financing by 2025.
This year, Maybank is focusing on transition financing as the group as a whole is committed to creating an impact. “We recognise that clients will be in different stages of the transition journey. We are walking the talk in customer-centricity by using our sustainable product framework and proactively helping clients on their respective decarbonisation journey by providing advisory services and supporting them with transition financing solutions,” says Khairussaleh.
The way Oh-Lau sees it, there is no “cookie-cutter” plan for transitioning into more sustainable ways of doing business as different clients in different industries have their own capabilities and goals.
Nonetheless, Oh-Lau is upbeat about investments in renewables and other green technologies. He expects these investments to continue accelerating this year and in the coming years in Asean, supported by sustainable debt financing.
Exciting deal landscape
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Apart from sustainability, another trend to watch out for is the M&A space, says Oh-Lau, who is positive about activities in this sphere despite a current slump in deals across the various major markets. “Valuations are attractive now and there are a lot of companies exiting their investments or recycling their capital. This is a good time for M&A,” says Oh-Lau.
Several industries are undergoing a desaturation event where the players are consolidating while smaller players are being acquired by bigger ones.
Aditya Laroia, CEO of Maybank Securities in Singapore, adds that Maybank as a group is focusing on this segment, especially within the Asean space. He cites Cambodia, Vietnam and Indonesia as countries having M&A opportunities in several sectors from tech to healthcare and education.
“There are a lot of opportunities in this part of the world and not just from an investment perspective. There are also opportunities for collaboration, whether through M&As or private markets. All of these are going to add value to this part of the world,” says Laroia.
Although interest rates remain high and should affect funding and the cost of debt, Oh-Lau notes that valuations today are considered attractive enough for investors to make a strategic decision.
Oh-Lau has also observed that investors these days are becoming more prudent. “Before the pandemic, there was so much money splashing around when we spoke to investors. But investors are now ‘returning to basics’ and looking deeply into cash flows, profits and essentially business fundamentals and if business viability is present,” he says.
“We’ve seen more deal activity than last year. Many of the transactions we were working on that got stalled or stopped in 2022 have come back and a few have been completed. The pipeline looking into the second half is strong,” says Laroia, who is overall positive about deals, given that the market is at the tail end of the rate hikes. This gives markets some chance to recalibrate, following which market momentum should resume.
Meanwhile, Oh-Lau expects the regional initial public offering (IPO) landscape to flourish. For example, Indonesia and Malaysia have seen some interesting IPO activity in the past year, with GoTo’s IPO raising US$1.1 billion ($1.49 billion) on the Indonesia Stock Exchange last year while Malaysia has seen a resurgence of listings from consumer staples to tech companies and F&B manufacturers. One of them was Malaysia-based Farm Fresh which was listed on Bursa last February and was the largest listing since June 2021, raising some RM1 billion.
In comparison, Singapore’s IPO landscape has been somewhat muted of late with 2022 seeing more delistings compared to listings. At Maybank’s end, Laroia explains that the group is having ongoing discussions with the Singapore Exchange (SGX) on how they can promote companies to list in Singapore. More specifically, Maybank is looking into mid-range companies and suggesting cross-listing opportunities.
“From a general development of knowledge, better understanding of the ecosystem and writing in core research about companies that aren’t likely to be picked up — these are areas we are trying to drum up more interest from. And as the investor base develops, the right environment should see a lot more listings,” says Laroia, adding that coverage and education are important in growing the investor base.
Laroia also says the outlook of capital markets is looking better compared to previous years. “The market needs some direction for investors to come back and invest properly ... But time is not on their side and they will need to deploy capital if they want to see returns,” says Laroia.
“There is a fair amount of capital waiting to be deployed. Once people have visibility of where the inflationary correction measures and rate hikes are going, we believe a positive kind of momentum will be generated as markets will head into the second half and then into 2024,” adds Laroia.
