Petronas Chemical Group Bhd's (PCG) initial public offering (IPO), which is South-East Asia's biggest, is set to create a lot of buzz among both local and foreign investors and outshine that of other big-capitalised firms on Bursa Malaysia Securities.

It is set to debut at about RM5.50 per share, surpassing Maxis Bhd's, which fetched a premium of nine per cent over the indicative price of RM5 (RM5.46).

It may also overlap with American International Group's listing of its Asian life insurance business, AIA, in a deal worth more than US$15 billion.

The stockbroking industry is watching and waiting anxiously for the listing this Friday. PCG has been priced at RM5.20 apiece for institutional investors and RM5.04 for retailers.

The listing involves the sale of 2.48 billion shares. The IPO raised over US$4.2 billion and this comes at a point in time when Asian capital markets are enjoying significant influx of liquidity.

Analysts said the listing would give a definite boost to the local bourse's standing among the emerging markets and further internationalise the stock market.

RAM Holdings Bhd's group chief economist, Dr Yeah Kim Leng, said the listing would benefit the exchange as it would add immense liquidity and enhance Malaysia's attractiveness for foreign investors, given Petroliam Nasional Bhd's (Petronas) reputation as a Fortune 500 company and a major player in the petrochemical industry.

This should give a boost to Bursa Malaysia Kuala Lumpur Composite Index, he said.

Yeah said attracting foreign investors was a double-edged sword.
'When we attract foreign investors they will also take flight when they sense vulnerabilities, slippages or slide in the economy.

'The key is to ensure that the equity market is built on solid fundamentals, that is, the listed companies are well-run and the industries they are in are thriving in a well-managed and robust economy with level-playing field for local and foreign investors,' he told Bernama here today.

Recently, Prime Minister Datuk Seri Najib Tun Razak met top fund managers after delivering a keynote address on Malaysia's attributes as an investment destination for equity and capital market investments in Hong Kong.

One of the issues fund managers brought up was that the local stock market lacked large-cap stocks as there were only a few of them on Bursa Malaysia.

Yeah said while large and liquid stocks were necessary conditions to attract foreign investor interest, it was the follow-through actions leading to PCG's listing that would build investor confidence and stoke sentiments, leading to a widening pool of investors.

'Bursa Malaysia's future growth and attractiveness for foreign investors is highly depended on such action-oriented policies.
'In the face of competing markets such as Hong Kong and Singapore, this major listing will definitely provide that depth the market is seeking,' he said.

MIDF Research senior analyst, Syed Muhammed Kifni Syed Kamaruddin, said PCG was a credible investible option in the eyes of the international investment community and was expected to rank among the top five in terms of market cap.

'To have both local and international institutions as the anchor investors would add credence to the investability of PCG,' he said.

On the potential of PCG's price going higher, Syed Muhammed Kifni said many listed petrochem companies in the advanced economies were trading at price earning (PE) multiples in the early teens or even high single-digit due to limited growth prospects in their respective regions.

'PCG deserves a higher PE rating as the Asia-Pacific region offers better opportunities for further expansion and earning growth going forward.

'Adding impetus to PCG is the desire of the authorities to craft Malaysia as an investment destination for equity and capital market by having more local stocks with large capitalisation.

'On that note, we are looking at a price of around RM5.50 as a fair value and trade at a premium just as was evident in the case of Maxis,' he said.

It was reported that the institutional portion of the IPO was about 10 times oversubscribed which amounted to about RM90 billion, he said. 'Hence, we believe such an immense appetite reflects confidence in the company,' he said. -- Bernama