IPOs in China to maintain pace, HK to see rebound in 2024: Deloitte

IPOs in China are expected to maintain its pace in 2024 while the Hong Kong market would rebound when US interest rate hikes end and funds redirect to Asia, said Deloitte China recently.

As of 8 December 2023, assuming announced listings complete before the end of the year, the Shanghai and Shenzhen stock exchanges are expected to have led the global IPO market in 2023 by funds raised, Deloitte China's Capital Market Services Group (CMSG) noted. 

This will be a result of them listing four of the world’s 10 largest IPOs in the first three quarters of 2023, the firm said, adding that Nasdaq will have retained 3rd place with the listing of a UK semiconductor company and New York Stock Exchange will have remained in 4th place after its listing of a personal care company. 

The National Stock Exchange of India is set to have come in 5th following a large number of deals, followed by Hong Kong Stock Exchange in 6th position, the firm added.

According to Deloitte China's Capital Market Services Group (CMSG)’s review of the performance of Chinese mainland and Hong Kong initial public offering (IPO) markets in 2023 and forecasts for 2024, there are several major observations and predictions as follows.

As a result of issuing IPOs at a regular pace based on scientific and rational decision-making to balance the development of the primary and secondary markets, the A-share IPO market is expected to have recorded fewer deals and lower deal volume in 2023 than it did in 2022. 

• The Hong Kong market, meanwhile, has been hit by intensive US interest rate rises, a slower-than-expected Chinese economic recovery, sharp cuts in market valuations and reduced market liquidity, and is expected to post its weakest annual performance for two decades.
• Existing IPO issuance policies for the A-share market are likely to remain in force in 2024. 
• Offerings from Beijing Stock Exchange should be the most active segment, resulting in a slower or similar performance for the overall A-share IPO market in 2024. 
• On the other hand, as the US Fed started to slow interest rate hikes in Q3 2023 and the market expects an end to the rate-hike cycle in 1H 2024, IPO activity in Hong Kong is heading for a rebound, supported by a pipeline that includes specialist technology companies, postponed large offerings from 2023, return listings of prominent China concept stocks, new listings from de-SPAC transactions, listings from international companies, and GEM listings.
• By 31 December 2023, the Chinese Mainland will have had about 310 new listings raising approximately RMB355.1 billion versus 424 IPOs raising RMB586.8 billion in 2022. 
• This would represent a 27% drop in the number of IPOs in China and a 40% decline in funds raised. Shanghai Stock Exchange will have had 103 deals raising RMB193.3 billion and Shenzhen Stock Exchange will have had about 132 new listings raising RMB147.7 billion. Beijing Stock Exchange will have listed 75 new companies raising RMB14.1 billion. 
• ChiNext will continue to have had the largest number of IPOs in China and the SSE STAR Market will have raised the most IPO funds. IPO proceeds from the ChiNext and SSE STAR Markets will exceed those from the two main boards.
• In Hong Kong, the market is expected to have seen 65 IPOs raising approximately HK$45.8 billion in 2023, versus 84 new listings raising HKD$9.6 billion in 2022. This would mark a 23% cut in the number of IPOs and a 54% decline in proceeds raised. 
• The Hong Kong market recorded just three large listings. Only one China concept stock listed by way of introduction.
• The CMSG forecasts that the A-share IPO market will have about 260 to 330 new listings raising approximately RMB267 to RMB317 billion in 2024. 
• The SSE STAR Market is expected to have 35 to 40 listings raising RMB49 billion to RMB56 billion, followed by ChiNext with 65 to 80 new listings raising RMB78 billion to RMB95 billion. 
• The main boards in Shanghai and Shenzhen will have 70 to 90 IPOs raising RMB122 billion to RMB142 billion, with another 90 to 120 listings raising RMB18 billion to RMB24 billion on Beijing Stock Exchange.
• The CMSG anticipates Hong Kong will record 80 IPOs raising HKD100 billion in 2024. Funds are likely to be redirected amid increased market liquidity and improved market valuations following an end to the US interest rate hike cycle in 2024.
• Hong Kong’s pipeline of more than 90 listing applicants, including specialist technology companies, de-SPAC transactions and delayed large offerings from 2023, and the potential launch of GEM reform, will help support the market recovery.
• Listings from international companies and by Chinese companies due to a slowdown in the A-share IPO market will also drive the market.