2015 Interim Review and Outlook of Hong Kong and Chinese Mainland IPO Markets

In the “2015 Interim Review and Outlook of Hong Kong and Chinese Mainland IPO Markets” report released by the National Public Offering Group of Deloitte China, it is expected that funds raised in initial public offerings (IPO) in the Shanghai and Hong Kong markets to rank first and second respectively during the first six months of 2015. 

Hong Kong’s IPO market heated up and proceeds surged in the second quarter. The market is expected to conclude the first half of 2015 with 46 IPOs raising HK$127.5 billion, down 4% and up 57% respectively from 48 IPOs raising funds of HK$81.3 billion over the same period of last year. This is the best interim performance since 2011.

The liberalization of capital accounts and interest rates, the mixed ownership reform for banks, and the imminent launch of the Shenzhen-Hong Kong Stock Connect have spurred more than 10 Chinese institutions from the financial services sector to plan to issue new shares in Hong Kong. Together with the potential listings from Chinese state-owned enterprises following the ownership reform as well as those from consumer and retail businesses, Hong Kong is expected to see at least HK$240 billion proceeds from 120 IPOs for the entire year 2015.

The market is looking forward to seeing how the second stage consultation on weighted voting rights (WVR), in particular on the secondary listing of companies with WVR structures and a Greater China "centre of gravity" will progress. Deloitte hopes this proposed change can come in time for opportunities from the U.S.-listed Chinese firms at last. 

Looking across the border, since the China Securities Regulatory Commission’s move to approve two batches of IPO applications each month in April, both the pace and volume of the Mainland’s new offerings have increased. This is the strongest first half-year performance since 2011. Some 113 companies are projected to complete their IPOs on the Shenzhen Stock Exchange raising RMB44 billion (HK$54.9 billion) by the end of 30 June 2015, while the Shanghai Stock Exchange would have about 79 new listings raising RMB103.4 billion (HK$129 billion). 

Significant developments are also anticipated at the A-share market in the second half of 2015. In addition to the proposed amendments to the Chinese Securities Law to support a registration-based regime, the IPO window for small and medium-sized city and rural commercial banks may be re-opened following a recent change in the application review status of a number of banks. Deloitte believes the regulator’s priority would be in relieving the fundraising pressure from more than 500 companies that have filed for IPO applications before the new registration regime is introduced. As such, Deloitte forecasts the markets in Shanghai and Shenzhen to have a total of 350-400 IPOs raising RMB225-250 billion in total in 2015. Small and medium manufacturing, technology and consumer/ retail companies would drive most of these new offerings.