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2017 Review and 2018 Outlook of the Chinese Mainland and Hong Kong's IPO Markets
Analysis from the report, '2017 Review and 2018 Outlook of the Chinese Mainland and Hong Kong's IPO Markets' by the National Public Offering Group of Deloitte China indicates that the jewel crown of the global IPO proceeds ranking of 2017 is to be claimed by the New York Stock Exchange with its strong deals since the beginning of the year followed by the Shanghai Stock Exchange and then the Stock Exchange of Hong Kong. Looking ahead into 2018, IPO activities of the Chinese Mainland are expected to slow down slightly due to the tighter scrutiny following the establishment of the new Public Offering Review Committee. Hong Kong's IPO market is likely to remain vibrant at a similar level as 2017 with more IPOs emerging from or related to the new economy sectors resulting from the planned listing regime reform. But the impact of U.S.' tax reform, normalization of interest rate, and balance sheet cut onto the emerging markets cannot be underestimated.
In 2017, both the numbers of new listings for the market and the GEM reached new highs in Hong Kong. This year also saw a record high of the number of IPOs from overseas companies due to an improved market valuation. The positive market sentiment resulting from the anticipated interest rate hike timetable, China's 19th Communist Party Congress as well as more southbound capital inflows from the maturing market connectivity programs boosted the appetite for IPO subscription activities.
Deloitte is cautiously optimistic about Hong Kong's IPO market outlook in 2018. Together with the nearly 160 companies that have submitted IPO applications and at least five companies from the technology, finance, and life science health care sectors that may launch huge offerings in Hong Kong, Deloitte forecasts about 150-160 IPOs raising at least HK$160-HK$190 billion by the end of 2018.
The GEM consultation conclusions, changes to GEM and MB Listing Rules and the upcoming plan to expand Hong Kong's listing regime including a market consultation on the subject are poised to strengthen Hong Kong's super-connector role, as well as its positioning as both an international financial centre and the major fundraising hub for Southeast Asian countries, the Belt and Road Initiative and the cluster of cities in the Guangdong-Hong Kong-Macau Greater Bay Area. Chinese economy cannot be underestimated and could take a toll on both the market liquidity and valuation.
The vibrant IPO activities of the Chinese Mainland market have considerably benefited from the supervision of the stable number of IPOs to the market, a faster IPO pace and a stabilized IPO price. Compared with last year, the line of candidates awaiting listing review significantly reduced by more than 200 companies.
Given the tighter review and scrutiny over IPO applications by the Chinese regulator, and the recent rejected applications, Deloitte anticipates that Mainland IPO activities will moderately slow down in 2018. Given China's role in the global economy, small and medium manufacturing and technology companies in terms of the number of upcoming new listings will still be the major trend in the A-share IPO market. Deloitte, therefore, anticipates the Chinese Mainland to finish 2018 with about 320-380 IPOs raising approximately RMB170-200 billion.
