Hong Kong and Shanghai Stock Exchange to rank as first and third largest bourses for IPO proceeds in 2015
Optimistic outlook for both markets in 2016 amidst U.S. interest rate hike and slowdown of Chinese economy
Published: 21 December 2015
The National Public Offering Group of Deloitte China today released its insights on the new listings Hong Kong and the Chinese Mainland in 2015 and 2016. An estimation and analysis of the initial public offering (IPO) proceeds raised among the major stock exchanges by the end of 2015 indicated that Hong Kong and Shanghai would become the first and third largest bourses in 2015. A strong pipeline and a supportive environment for IPO activities point to both markets remaining active in 2016 amidst an anticipation and uncertainty over the pace of U.S. interest rate hikes and reduced growth in the Chinese economy.
As at 31 December 2015, Hong Kong is expected to see 123 IPOs raising more than HK$260.3 billion against 115 new listings raising HK$227.7 billion in 2014, a growth of 7% and 14% in the number of new listings and IPO proceeds over last year. Nine jumbo IPOs and seven large new listings contributed to approximately four-fifths of the proceeds raised in 2015. More than 80% of these large-to-mega IPOs were H-share offerings.
“Amid developments such as greater market volatility, anticipation over a U.S. interest rate hike, the weakening Chinese economy and uncertain global economic outlook, Hong Kong maintained its significant position as a key financing center for Chinese firms to go international. This is evident in the flocking of large Chinese financial services institutions and record-breaking H-share listings to the market over the year,” said Mr. Edward Au, Co-Leader of the National Public Offering Group, Deloitte China.
At the same time, the A-share IPO market was vibrant in the first six months of 2015, suspended in early July and re-activated in December. As a result, 220 IPOs were completed raising proceeds of RMB158.8 billion in Shanghai and Shenzhen. As fewer IPOs were approved to launch in 2014, both the number of new listings and funds raised jumped sharply in 2015 by 76% and 102% respectively. The debuts of three large new listings, which raised a total of RMB53.3 billion, helped boost proceeds compared with 2014 when there was only one large offering raising merely RMB7 billion.
“The regulator’s effort in investigating various market irregularities from June onwards as well as a swift decision of resuming IPO activities in November helped pave the way for a more stable A-share market and eventually the launch of the registration-based regime for new share issuance expected at the latest by the third quarter of 2016,” commented Mr. Anthony Wu, Leader of China A-Share Capital Market of the National Public Offering Group, Deloitte China.
In terms of the funds raised over the year by stock exchanges, Hong Kong is projected to stand firmly at the top with the New York Stock Exchange in second place through 53 IPOs raising HK$149.8 billion. The Shanghai Stock Exchange is likely to be third, raising approximately HK$135.6 billion from 89 IPOs and the London Stock Exchange should take fourth place with HK$127.8 billion from 74 IPOs. Though the Shenzhen Stock Exchange saw a large number of IPOs (131), it is likely to fall to eighth place in proceeds and expected to raise HK$62.3 billion.
Looking ahead into 2016, Deloitte anticipates Hong Kong to see another fruitful year with a strong pipeline of mainly Chinese financial services institutions ranging from securities firms, financial technology company, city commercial banks, insurance firms, and financial leasing companies as well as pharmaceutical firms and state-owned enterprises. The IPO surge is to be fuelled by the state government’s ongoing effort of reforming the financial system and state-owned enterprises.
“We expect Hong Kong to complete 115-125 new listings raising HK$260-280 billion by the end of 2016. This forecast is backed by a strong pipeline of IPO candidates as well as a long line of active IPO applications of more than 90 companies at the stock exchange. The launch of the registration-based regime on the Mainland later in 2016, however, will not have an immediate and significant impact on these IPO candidates and applicants preparing to go global, or on maximizing their offering scale by leveraging Hong Kong’s financing platform, which offers higher market liquidity,” elaborated Mr. Au.
Mr. Au believes a continuous effort of raising Hong Kong’s profile to become a regional financing hub in addition to reinforcing its role as a fundraising center for Chinese companies that go global is of paramount importance. Such a ‘super-connector’ positioning will continue to lure state-owned enterprises and companies in the Southeast Asia region to Hong Kong, which in return will help sustain the leadership of Hong Kong’s IPO market for a longer term.
Following a brief suspension of IPO activities in 2015, Deloitte expects the A-share IPO market to become more stable in 2016, especially when the turning point of the launch of the registration regime is approaching. The regulator is likely to modestly increase the IPO activities, which will translate into approximately 380-420 new listings raising RMB230-260 billion in the year. The majority of these IPOs would come from small-to-medium-sized manufacturing, technology, media and telecommunications and consumer and retail companies.
Notes to editor:
Unless specified otherwise, all statistics are estimated and analyzed by 31 December 2015.
Sources of the statistics for the Hong Kong IPO market: Hong Kong Stock Exchange, Deloitte estimates and analysis, excluding the transfer of listings from the Growth Enterprise Board to the Main Board and proceeds raised from the over-allotment options of 24 newly-listed companies on the Main Board, which are expected not to announce their stabilization actions by 31 December 2015.
Sources of the statistics for the A-share IPO market: CSRC, Deloitte estimates and analysis.