One of the hottest IPO markets this year is not in a country brimming with global tech giants, nor does it rank among the top 10 global economies by size.
But Indonesia, a collection of islands with a big population and a fast-growing economy, sits on vast deposits of the metals needed to make batteries for electric vehicles. That has made the country an important engine of the global green transition — and a magnet for investors.
The Southeast Asian country currently ranks as the world's fourth-largest market for newly listed companies when measured by the amount of capital raised, according to data from Dealogic, putting it behind leader China, the United States and United Arab Emirates.
It has overtaken Hong Kong — long one of the top IPO markets — for the first time since 1995, and is outpacing economic powerhouses India, South Korea and Japan.
"It is not normal," said Perris Lee, who focuses on Asian equity capital markets at data provider Dealogic. This year, he told CNN, "will likely ... be the best for Indonesia ever."
So far this year, investors have poured $2.1 billion into Indonesian IPOs, he said. That's just shy of the $2.2 billion the country's firms raised over the whole of 2022, while at least five more major IPOs are set to come in 2023.
Global IPO slowdown
Part of Indonesia's IPO success this year can be explained by lackluster performances elsewhere.
Investors have pulled back from equity markets over the past year as rising interest rates have pushed up the cost of capital.
The US IPO market, usually the world's largest, has suffered given its reliance on particularly rate-sensitive tech companies, Lee said. Hong Kong, meanwhile, has been held back by poor valuations and the legacy of strict Covid lockdowns, he added.
But Indonesia's strong showing this year is also based on its fundamental advantages.
Many of the companies going public have been metals producers, buoyed by last year's boom in commodity prices.
Indonesia accounts for nearly a quarter of the world's nickel reserves, equal only to Australia's riches, and sits on huge deposits of cobalt and copper. All three metals are used to make the batteries in electric vehicles, while copper is also a key material in solar panels and cobalt an essential part of the magnets used in wind turbines.
Mining company Harita Nickel raised $660 million in its market debut last month, Indonesia's biggest listing so far this year. The firm's share price has climbed 29% since then, according to Dealogic data. Amman Mineral International, a gold and copper miner, is expected to raise $1 billion when it lists later this year, says Dealogic.
'Very exciting'
The Indonesian government has had a big hand in attracting investors, by accelerating the privatization of state-owned companies through IPOs and encouraging foreign battery producers to invest in the country.
It has also made a long-shot bid to create a cartel of nickel-exporting countries, similar to the Organization of the Petroleum Exporting Countries (OPEC), which holds great sway over global oil prices.
"A large part" of Indonesia's IPOs this year has come from the listing of a number of state-owned enterprises, Roderick Snell, an investment manager in emerging markets at Baillie Gifford, told CNN.
"Getting them listed should lead to improved [corporate] efficiency over time... leading to significant investment in the country that we've never seen before," he added.
Since his 2014 election, President Joko Widodo has imposed several export bans on raw commodities as a way to force foreign companies to process the materials in-country, draw investment from overseas and boost the value of the final product.
More recently, in 2020, the government banned exports of nickel ore. It is also planning to introduce bans on shipments of copper, and ores of iron and aluminum.
Widodo's plan seems to be working: In 2022, total foreign direct investment (FDI) into Indonesia hit $44 billion, an all-time annual high and a 44% increase on the previous year, according to data from the Indonesian Investment Coordinating Board. Most of that investment went into the country's metals sector.
To date, Widodo's commodities trade policies alone have brought in $25 billion in FDI, Snell wrote in a note in April.
"Our increasing conviction in [Indonesian companies] comes from how its government maximizes the potential of its bountiful raw materials," he wrote.
Emily Fletcher, fund manager at BlackRock, agrees.
Around 17% of the holdings in Fletcher's fund, which invests exclusively in smaller-sized emerging markets, are in Indonesian companies at the moment, representing the biggest share by country.
"Indonesia is moving up the value chain in terms of what it's exporting," she told CNN. "That's something that we expect to continue."
Fletcher said the value of Indonesia's nickel exports had ballooned over the past two years as it had done more of the downstream processing in-country. That jump in value is "very exciting," Fletcher said, partly because it has helped reduce Indonesia's current account deficit.
"[Indonesia] will become much less reliant on foreign borrowing as that current account deficit closes," she said, adding that this change had the potential to boost GDP.
Rapid growth
It's not just the nation's metals that are attracting investors. Indonesia's economic output has grown at an average of 4.3% over the past decade. It has an enormous, youthful population — at 274 million people, it's the world's fourth most populous country — and a growing middle class with money to spend.
According to the World Bank, the number of economically secure Indonesians tripled between 2002 and 2016 to 52 million. That group now accounts for close to half of domestic consumption.
Little surprise then that the majority of the stocks in Fletcher's fund are focused on Indonesia's domestic economy.
"We're still seeing an acceleration within the domestic economy and, as a result, with a lot of the companies that we hold, we are seeing earnings coming in above analyst expectations," she said.
Indonesia has come a long way on another measure too. A decade ago, it scored poorly on the World Bank's Ease of Doing Business index, which gauges how easy it is for companies to comply with local regulations, noted Ian Hiscock, head of consulting for China and Southeast Asia at CRU, a market intelligence firm.
"Since then, the country has made massive improvements," he said. "I expect people in the West to hear more about Indonesia in the years to come."