Southeast Asia’s tech take-off is transforming equity markets
Southeast Asia’s thriving technology sector is driving wealth creation and transforming equity markets in the region. Using existing shareholdings to access liquidity – without dilution or foregoing upside – can help investors navigate this changing environment.
Southeast Asia’s equity markets are evolving rapidly as more of the region’s technology champions opt to go public. The latest landmark listing – of Indonesian super-app GoTo – confirms that equity investors in this dynamic region can no longer ignore the rise of new-economy companies as they become a bigger component of its capital markets.
GoTo completed its hotly anticipated IPO in torrid equity market conditions in March, raising over US$1 billion from local and international investors. As well as a major wealth creation event for the founders and early backers of ride-hailing platform Gojek and e-commerce firm Tokopedia – which merged to form GoTo in 2021 – the listing adds to the roster of Southeast Asian technology companies that are now available to investors in the public equity markets.
GoTo joins Southeast Asian peers such as Sea Ltd and Grab Holdings, which are both listed in the US, and e-commerce firm PT Bukalapak.com, which went public in Jakarta in 2021 in what remains Indonesia’s biggest IPO.
It’s still early days for technology firms in Southeast Asia’s capital markets: information technology has a weighting of just 1.54% in the MSCI AC ASEAN Index and only one firm – SEA – features in its top 10 holdings.[1] But the rapid growth of private equity investment in the region points to the likely direction of travel for public markets. According to DealStreetAsia, ASEAN start-ups raised US$25.7 billion from private equity and venture capital investors in 2021, which was more than double the amount in 2020 and well above the previous peak of about US$14 billion in 2018.[2]
The connection between technology stocks and wealth creation is well known in the more developed US market, and has also been prominent in China. As Southeast Asia progresses along the same trajectory, technology companies like GoTo will soon represent a major proportion of equity indexes – and of investors’ portfolios.
ASEAN opportunities
Southeast Asia’s strong fundamentals are a key driver for this growth in capital formation. With a population cresting near 700 million, the combined GDP of ASEAN’s 10 member states reached US$3 trillion in 2020.[3] The bloc is now the world’s fifth-largest economy and is set to add 140 million new young consumers to the world by 2030, driving about US$4 trillion of new consumption.[4] Much of that also hinges on innovation as the majority of young people in Southeast Asia embrace digital lifestyles.
As more of the region’s fast-growing technology companies head to the public equity markets, a new generation of entrepreneurs will benefit. These equity-rich founders and senior executives from newly-listed firms may still be in need of liquidity, though, for purposes such as founding new start-ups or increasing their shareholding in the listed firm.
Likewise, major shareholders in firms that have historically been the backbone of Southeast Asia’s economy – such as natural resources, energy and finance – may want to diversify their portfolios by increasing their exposure to new economy stocks.
Equity financing can be an attractive solution for both groups. Share-backed lending offers a way for individual shareholders to monetise their stakes without sacrificing the potential for long-term appreciation.
Loans based on public equity holdings can be processed quickly and offer attractive interest rates, since the collateral reduces the risk to the lender. And at the end of the term of the loan, the shares are returned to the borrower, allowing them to retain exposure to the performance of the underlying stock.
GoTo’s landmark IPO makes it clear that technology is transforming Southeast Asia’s equity markets – and wealth creation dynamics. For investors who have driven this trend – or want exposure to it – share-backed financing can be a compelling solution.
[1] https://www.msci.com/documents/10199/898cceae-3062-4000-a1a4-9877c6d8325e
[2] https://asia.nikkei.com/Spotlight/Market-Spotlight/Gold-rush-ASEAN-startup-fundraising-more-than-doubled-in-2021
[3] https://www.aseanstats.org/wp-content/uploads/2021/12/ASEAN-KEY-FIGURES-2021-FINAL-1.pdf
[4] https://www.bain.com/insights/future-of-consumption-in-fast-growing-markets-asean-2030/
Disclaimer
Past performance does not guarantee future returns, and individual returns are not guaranteed or warranted.
This Document is intended solely for accredited investors, sophisticated investors, professional investors, or otherwise qualified investors, as may be required by law or otherwise, and it is not intended for, and should not be used by, persons who do not meet the relevant requirements. The content provided herein is for informational purposes only and is general in nature and not targeted to any specific objective or financial need. The views and opinions expressed in this Document have been prepared by third parties and do not necessarily reflect the views and opinions of EquitiesFirst. EquitiesFirst has not independently examined or verified the information provided herein, and no representation is made that it is accurate or complete. Opinions and information herein are subject to change without notice. The content provided does not constitute an offer to sell (or solicitation of an offer to purchase) any securities, investments, or any financial products (“Offer”). Any such Offer shall only be made through a relevant offering or other documentation which sets forth its material terms and conditions. Nothing contained in this Document shall constitute a recommendation, solicitation, invitation, inducement, promotion, or offer for the purchase or sale of any investment product by First Holdings, LLC or its subsidiaries (collectively, “EquitiesFirst”), nor shall this Document be construed in any way as investment, legal, or tax advice, or as a recommendation, reference, or endorsement by EquitiesFirst. You should seek independent financial advice prior to making an investment decision about a financial product.
This Document contains the intellectual property of EquitiesFirst in the United States and other countries, including, without limitation, their respective logos and other registered and unregistered trademarks and service marks. EquitiesFirst reserves all rights in and to their intellectual property contained in this Document. The Document should not be distributed, published, reproduced or otherwise made available in whole or in part by recipients to any other person and, in particular, should not be distributed to persons in any country where such distribution may lead to a breach of any legal or regulatory requirement.
EquitiesFirst make no representation or warranty with respect to this Document and expressly disclaim any implied warranty under law. You acknowledge that EquitiesFirst is not liable under any circumstances for any direct, indirect, special, consequential, incidental, or punitive damages whatsoever, including, without limitation, any lost profits or lost opportunity, even if EquitiesFirst has been advised of the possibility of such damages.
EquitiesFirst makes the following further statements that may be applicable in the stated jurisdiction:
Australia: Equities First Holdings (Australia) Pty Ltd (ACN: 142 644 399) holds an Australian Financial Services Licence (AFSL Number: 387079). All rights reserved.
The information contained on this Document is intended for persons located in Australia only and classified as a Wholesale Client only as defined in Section 761G of the Corporations Act 2001. The distribution of information to persons outside this criteria may be restricted by law and persons who come into possession of it should seek advice and observe any such restriction.
The material contained in this Document is for information purposes only and should not be construed as an offer or solicitation or recommendation to buy or sell financial products.
The information contained in this Document is intended to be general in nature and is not personal financial product advice. Any advice contained in the Document is general advice only and has been prepared without considering your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs. You should seek independent financial advice and read the relevant disclosure statements or other offer documents prior to making an investment decision about a financial product.
Dubai: Equities First Holdings Hong Kong Ltd (DIFC Representative Office) at Gate Precinct Building 4, 6th Floor, Office 7, Dubai International Financial Centre (commercial license number CL7354) is regulated by the Dubai Financial Services Authority (“DFSA”) as a Representative Office (DFSA Firm Reference No.: F008752). All rights reserved.
The information contained in this document is intended to be general in nature, and, to the extent that it is perceived as advice, any advice contained in this document is general advice only and has been prepared without considering your objectives, financial situation, suitability of the financial products or your needs.
The material contained in this document is for information purposes only and should not be construed as financial advice, including an offer or solicitation or recommendation to buy or sell financial products. The information contained in this document is intended to be general in nature and any advice contained in this document is general advice only and has been prepared without considering your objectives, financial situation, suitability of the financial products or your needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs. If you do not understand the contents of this document, you should consult an authorised financial adviser.
This document relates to a financial product which is not subject to any form of regulation or approval by the DFSA. The DFSA has no responsibility for reviewing or verifying any documents in connection with this financial product. Accordingly, the DFSA has not approved this document or any other associated documents nor taken any steps to verify the information set out in this document, and has no responsibility for it.
Hong Kong: Equities First Holdings Hong Kong Limited is licensed under the Money Lenders Ordinance (Money Lender’s Licence No. 1681/2023) and to carry on the business of dealing in securities (Type 1 licence) under the Securities and Futures Ordinance (“SFO”) (CE No. BFJ407). This Document has not been reviewed by the Hong Kong Securities and Futures Commission. It is not intended as an offer to sell securities or a solicitation to buy any product managed or provided by Equities First Holdings Hong Kong Limited and is only intended for persons who qualify as Professional Investors under the SFO. This document is not directed to individuals or organizations for whom such offers or invitations would be unlawful or prohibited.
Korea: The foregoing is intended solely for sophisticated investors, professional investors or otherwise qualified investors who have sufficient knowledge and experience in entering into securities financing transactions. It is not intended for, and should not be used by, persons who do not meet those criteria.
United Kingdom: Equities First (London) Limited is authorised and regulated in the UK by the Financial Conduct Authority (“FCA”). In the UK, this Document is only being distributed and made available to persons of the kind described in Article 19(5) (investment professionals) and Article 49(2) (high net worth companies, unincorporated associations etc.) of Part IV of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (‘’FPO’’) and any investment activity to which this presentation relates is only available to, and will only be engaged in with, such persons. Persons who do not have professional experience in matters relating to investment or who are not persons to whom Article 49 of the FPO applies should not rely on this document. This Document is only prepared for and available to persons who qualify as Professional Investors under the Markets in Financial Instruments Directive.
