IPO markets in China and Hong Kong more vibrant in 2023

IPO markets in China and Hong Kong are estimated to be more vibrant in the rest of 2023, said Deloitte China's Capital Market Services Group (CMSG) when releasing its Q1 2023 analysis and forecasts.

The analysis indicates that Shenzhen Stock Exchange and Shanghai Stock Exchange were the world's largest and 2nd largest listing destinations by funds raised in Q1 2023 after hosting two of the world's 10 biggest IPOs each during the quarter. 

Abu Dhabi Securities Exchange took 3rd place with an IPO from a natural gas company, which was the world's 10 largest listing. Nasdaq took 4th place and the Stock Exchange of Hong Kong was in 5th, Deloitte noted.

The CMSG expects IPO activity in China to become vibrant in the remaining three quarters following full implementation of the registration-based regime. 

The Chinese market is expected to record more IPO funds in 2023 than it did in 2022, a record year, boosted by a gradual revival in economic and business activities, the government's policies and measures to stabilise economic growth, and normal issuance of IPOs, Deloitte said.

The full reopening of the Chinese Mainland and Hong Kong boundaries, numerous enhancements to Stock Connect, including the upcoming enhancement of Southbound Stock Connect with the addition of RMB-denominated stock trading desks, more spin-offs from technology companies, and the launch of the Specialist Technology Company listing rules are to set help the Hong Kong IPO market rebound in the remaining three quarters of 2023, the firm pointed out. 

However, how the US Fed's interest rate hikes and global banking issues develop over the year will determine the volatility and liquidity in global capital markets and ultimately the listing windows for companies' Hong Kong IPOs, Deloitte said.

IPO markets in China and Hong Kong in Q1

As of 31 March 2023, the  A share market had 68 new listings raising RMB65.1 billion against 85 IPOs raising RMB179.9 billion in Q1 2022, the firm observed. 

This represents a drop in the number of IPOs by 20% and a 64% plunge in funds raised, the firm added. 

In Q1 2023, 23 IPOs were listed on Shanghai Stock Exchange raising RMB29.0 billion while another 23 companies were newly listed on Shenzhen Stock Exchange raising RMB32.4 billion, according to Deloitte. 

In addition, there were 22 IPOs on Beijing Stock Exchange raising a combined RMB3.7 billion, said the firm. 

Beijing Stock Exchange had a sharp rise in activity, hosting the largest number of IPOs, while ChiNext — NASDAQ-style subsidiary of the Shenzhen Stock Exchange —  raised the most funds, Deloitte pointed out, adding that only Shenzhen Main Board and Beijing Stock Exchange saw growth in IPO proceeds during the quarter.

In Hong Kong, the stock exchange hosted 18 IPOs raising HKD6.6 billion in Q1 2023 versus 15 IPOs raising HKD13.6 billion in Q1 2022, said Deloitte. 

This represents a 20% rise in deal volume but a 51% plunge in deal value. In Q1 2023, all the offerings were small and there were no return listings of China concept stocks or IPOs of life science and healthcare companies, the firm added.

Forecast highlights

• The CMSG forecasts that for the full year, the A-share market will record 430 to 510 IPOs raising approximately RMB620 to RMB699 billion, versus 2022's 424 new listings raising RMB586.8 billion. 
• The SSE STAR Market could have 120 to 140 listings raising RMB305 billion to RMB340 billion. 
• ChiNext is forecast to have 150 to 170 new listings raising about RMB185 billion to RMB210 billion. 
• The main boards in Shanghai and Shenzhen will have about 60 to 80 IPOs raising RMB110 billion to RMB125 billion and there should be about 100 to 120 listings raising RMB20 billion to RMB24 billion on Beijing Stock Exchange.
• Hong Kong will record 110 new listings raising approximately HKD230 billion.