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ASX resilient amid IPO slowdown, denies shrinking claims

By Maja Garaca Djurdjevic
4 minute read

The ASX has weathered a challenging period for initial public offerings (IPOs) but denies that it is shrinking, according to Helen Lofthouse, managing director and CEO of ASX.

Following reports that the Australian Securities Exchange (ASX) could be shrinking, with over 100 delistings this financial year by the end of February 2024 compared to 75 in the same period last year, Lofthouse noted that despite a significant slowdown in global IPO activity due to rising interest rates affecting equity valuations, the ASX has continued to attract substantial new capital.

“During the last couple of years, we’ve seen a pretty rapid rate rising cycle and obviously that’s a challenging environment for equity valuations and that’s on a global basis. I’m happy to say it hasn’t been no IPOs, but certainly not at the scale we like to see in the busier part of the cycle,” Lofthouse said at the Stockbrokers and Investment Advisers Association (SIAA) 2024 Conference in Melbourne last week.

She shared the ASX has “taken a good, hard look” at the data to “really understand what is going on”.

What this “hard look” found is that over the past seven years, approximately $750 billion of new capital has been brought onto the ASX. This influx includes funds from IPOs and capital raisings by existing listed companies. Despite some high-profile companies delisting, the net new capital remains robust, totalling about $480 billion during this period. Even in 2023, a particularly slow year for global IPOs, the ASX still experienced a positive net capital inflow.

The continued capital attraction highlights the ASX's strength in providing investable opportunities, Lofthouse said.

“When we look at what really matters to investors, the investable opportunities, the story is still very much a positive one,” she noted.

She is also confident in a resurgence in IPO activity, emphasising the ASX's competitive edge on the global stage.

“When we compare ourselves globally, the first thing to say is that we really much compete on a global playing field when it comes to IPOs, and we stack up pretty well there. We do tend to be attractive for new capital on the exchange,” Lofthouse said.

Lofthouse also highlighted the ASX's proficiency in secondary capital raising, which has been a key factor in its attractiveness.

“One of the areas where we also punch above our weight is in secondary capital raising. One of the things that makes those very attractive as a place to be listed is the ease of raising additional capital if you’re a company that has opportunities you want to invest in. Now that’s a very straightforward process at the ASX … Last year, I think, we raised US$17 billion of secondary capital raisings on the ASX, it was almost as much as was raised in London which is very much larger,” she said.

CHESS replacement progressing

Touching on the CHESS replacement, which has been marred by lack of progress over the last couple of years, Lofthouse said there’s an “awful lot of stakeholder engagement going on right now”.

“There’s a lot of work going on at the moment with working groups, focus groups and then consultation processes,” Lofthouse said.

After abandoning a blockchain-based replacement for the ageing CHESS system in 2022, ASX announced in November that it would be proceeding with a product-based solution that will be delivered by global technology provider Tata Consultancy Services (TCS).

At the time, the ASX said the CHESS replacement project will now be a phased approach.

“We certainly heard the feedback from people who wanted to see if there was a way to have a more phased approach,” said the CEO last week.

“Phase one we’re expecting to do in 2026 and that will be the clearing service and then there will be a subsequent phase two, at the moment based on the information we have at this stage, we’re expecting that to be in 2028 and 2029 and that will cover the settlement and the sub register services of CHESS.”