China and Hong Kong IPOs will accelerate if the pandemic situation in China improves and the Russia-Ukraine War subsides in Q2 2022, said the Capital Market Services Group of Deloitte China recently.
In Q1 2022, the Shanghai Stock Exchange emerged to become the world's largest IPO venue by funds raised, following the listings of three prominent IPOs, according to the group’s Q1 2022 analysis.
Shenzhen Stock Exchange took 3rd place with a large IPO that became one of the world's 10 largest listings.
The Korea Stock Exchange, Saudi Exchange, and NASDAQ took 2nd, 4th, and 5th positions respectively, with each having mega flotations including the world's largest IPO by an electronic vehicle battery company, according to the analysis.
In Q1 2022, unlike its peer Hong Kong, China's new listing market faced less direct, huge impact from major macro-economic and geopolitical events, including US tapering and interest rate hikes and the Russia-Ukraine conflict, Deloitte China pointed out.
If these uncertainties, particularly the pandemic and events in Ukraine, subside in Q2, the Chinese market should perform more strongly, in particular if the registration-based IPO system is extended to the main boards in Shanghai and Shenzhen within the year, the firm added.
Analysis highlights
- In the three months to 31 March 2022, the Beijing, Shanghai, and Shenzhen stock exchanges hosted 85 IPOs raising RMB179.9 billion, against 100 new listings raising RMB76.1 billion in Shanghai and Shenzhen in Q1 2021.
- Although the number of deals fell by 15%, proceeds rose sharply by 136% due to a return jumbo listing by a telecommunications company.
- The majority of the proceeds, RMB116.6 billion from 37 IPOs, were raised in Shanghai, and Shenzhen markets recorded the most IPOs (41 IPOs raising RMB62.1 billion).
- Beijing Stock Exchange had seven new listings that raised about RMB1.2 billion.
- The SSE STAR Market, ChiNext, and Beijing Stock Exchange are set to remain the growth engine of the country's IPO market development in 2022 in terms of their combined number of deals.
- The SSE STAR Market could have 170-200 listings raising RMB210 billion-RMB250 billion in 2022, with 210-240 new listings raising about RMB160 billion-RMB180 billion on ChiNext.
- The main boards in Shanghai and Shenzhen should have about 120-150 IPOs raising RMB200 billion-RMB230 billion.
- Small and medium-sized manufacturing, technology, and LSHC companies will dominate the number of new listings.
- The Hong Kong market had 15 IPOs raising HKD13.6 billion in Q1 2022, with proceeds down 90% from HKD132.8 billion in the same period of 2021 and the number of listings down 53% from 32.
- There was only one large listing from a manufacturing company in Hong Kong.
- The Capital Market Services Group predicts Hong Kong will have about 120 listings raising about HKD330 billion in 2022, although the Russia-Ukraine conflict and Mainland’s recent pandemic outbreak pose uncertainties to the listing windows and performance and valuations of the Mainland businesses respectively.
- Return listings of China concept stocks will be the key theme, with IPOs from TMT, LSHC, and ESG companies the spotlights. Over time, the market will host more diverse in industries and businesses.
"The Hong Kong stock market started to plunge in early February 2022 due to speculation and worry about US interest rate rises and tapering and the Russia-Ukraine conflict,” said Dick Kay, Offering Services leader, Capital Market Services Group, Deloitte China. “The 5th wave of the pandemic cut back much of local business activity, further weighing on the performance of the IPO market. But we are confident momentum could pick up swiftly once some of the negative, temporary developments are improved or removed.”
