Hong Kong and Chinese Mainland IPO markets 2014 review and 2015 outlook

Hong Kong has enjoyed another record-setting year in 2014 and remained as the world's second largest IPO market in terms of proceeds raised for the second consecutive year. Excluding the transfer of seven listings from the Growth Enterprise Market to Main Board and proceeds raised from the green-shoe options of 10 newly-listed companies which did not announce their stabilization actions by 31 December 2014, Hong Kong completed 115 IPOs raising HK$227.7 billion by end of the year against 104 IPOs raising HK$168.9 billion in 2013. Both the numbers of IPOs and H-share listings reached new records. In 2015, Deloitte forecasts Hong Kong to close with HK$180-220 billion from about 110 IPOs. Seven to eight large-scale IPOs mainly from Chinese financial institutions and pharmaceutical companies are expected to highlight Hong Kong's IPO activities. These financial institutions range from small and medium-sized banks, insurance companies and brokerages that serve clients across both borders. Emerging Internet financing and interest rate liberalization are spurring these new listings. The reform of state-owned enterprises, China's plan to cut carbon emissions, relaxation of bank mortgage restrictions for residential properties, lower bank interest rates and ongoing new urbanization will encourage new listings from reformed state-owned enterprises, environmental protection companies and property developers and related businesses. Following the launch of a registration-based system, Deloitte expects IPO activities on the Mainland would not be significantly speeded up initially and would drive Chinese companies, in particular those are in need of financing and a listing status to cope with their development, to divert their listing plans to Hong Kong during 2015.

As for the A-share market, new listings have remained slower than 2012, the year before IPOs were suspended in 2013, following a restart of IPO activities in January. The total number of IPOs (125) and IPO funds (RMB78.7 billion) raised in the full year are expected to still be far behind those of 2012 when there were 154 new listings raising RMB103.4 billion. After seeing three consecutive quarters of small and medium IPOs, we finally saw a large-scale offering, Guosen Securities, completed before the end of 2014. Our analysis on the information released by the China Securities Regulatory Commission (CSRC) including the industry sectors of companies which are awaiting A-share IPO review, their application time and the current review progress found that the number of small and medium IPOs from companies of the manufacturing and technology, media and telecommunications sectors are still to dominate the A-share IPO market in 2015. Twenty-three IPOs were yet launched by the end of 2014 against the CSRC's commentary of approving 100 new listings in the second half of 2014. Together with the CSRC's plan to increase the level of IPO activities moderately in due course, Deloitte anticipates the A-share market to have about 180-200 companies listing and raising RMB100-120 billion in 2015.