Investors couldnt get enough of South-East Asias consumer-technology giants this past year. This year, they are struggling to log off quickly enough. Tech firms over the region are suffering. They are buffeted by exactly the same forces which have sent tech stocks globally tumbling by a lot more than 20% this season. Moreover, surging inflation and the expectation of higher interest levels have diminished the selling point of companies which shoot for rapid growth in today’s with reliable profits only arriving sometime in the foreseeable future.
South-East Asias giants not merely have to deal with the ills besetting tech firms worldwide, but additionally face a last-in-first-out problem. The spot is not a big portion of the allocation of several global portfolios, and investors who piled in at the later stages of the boom could have lost their appetite. It has pushed down valuations beyond the global slump. Sea, the regions largest listed tech firm, is really a just to illustrate.
Seas market capitalisation is currently $36bn, down from over $200bn late this past year. The firms share price recorded another steep decline after it released quarterly results on August 16th. Revenues, mostly generated by Shopee, its e-commerce subsidiary, and Garena, its video-gaming arm, rose more slowly than expected, up by 29% year-on-year to $2.9bn. Tech companies globally are increasingly being punished for an inability to create reliable income by investors now monomaniacally centered on cash generation. Seas free cashflow in the next quarter ran to minus $607m, the biggest negative figure on record.
Sea isn’t alone in its struggles. Grab, a Singaporean superapp offering deliveries, ride hailing, financial services and much more, listed publicly in December. Its shares have since tumbled. Bukalapak, an Indonesian e-commerce firm which also listed this past year, has seen its valuation stop by two-thirds in the last 12 months. GoTo, the Indonesian holding company that owns Gojek and Tokopedia after their merger in 2021, avoided the rout but its shares have languished lately.
Grabs second-quarter results, due after The Economist is published, and GoTos, unveiled on August 30th could bring better news, but Seas recent experience demonstrates the three firms ambitious plans for payments and financial technology, which require big investments and several years to cultivate, usually do not suit impatient investors.
Amid the gloom there are several known reasons for cheer. Emerging-market equity-fund allocations to the spot have risen slightly this season, notes Steven Holden of Copley Fund Research, as fund managers have looked for alternatives to Russian equities. Chinas crackdown on its tech companies also leaves investors searching for other areas to park their money.
Beyond listed firms, venture-capital activity has slowed however, not collapsed. Capital raised for funds centered on the region this season stood at $8.3bn on August 22nd, in comparison to $13.2bn for several of this past year, in accordance with Preqin, a data provider. The sum committed to vc deals this season runs to $10.7bn, already a lot more than the total for several but two previous years2018 and 2021. Sustained fascination with smaller, private companies is very good news for South-East Asia but does little for the pain of the bigger listed ones.
For more expert analysis of the largest stories in economics, business and markets, register with Money Talks, our weekly newsletter.
This short article appeared available portion of the print edition beneath the headline “Tropical Depression”