Q3 2020 Review and Outlook for Chinese Mainland and Hong Kong IPO Markets

The National Public Offering Group (POG) of Deloitte China released its latest analysis of the initial public offering (IPO) markets in the Chinese Mainland and Hong Kong for the first three quarters of 2020, and its forecast for their performance over the rest of this year.

Statistics indicate that the stock exchanges in Shanghai, Hong Kong and Shenzhen will claim first, third and fifth positions in the global IPO ranking by total funds raised in the first nine months of 2020, following the completion of many prominent flotations, including those of HK-listed companies on the SSE STAR Market and US-listed Chinese companies in Hong Kong, and the launch of ChiNext's registration-based regime.

Although hit by the pandemic, the deepening reform of the Chinese capital market and intensified geopolitical tensions channeled deal flow into the Chinese Mainland and Hong Kong.

The market is looking forward to massive A- and H-share flotations by a Chinese fintech group in Shanghai and Hong Kong next month. Several other developments are set to sustain the prevailing trend of listings in the Chinese Mainland and Hong Kong over the rest of this year, and in the near to medium term. These include the new limited partnership fund regime, the approval of Hong Kong-Mainland ETF cross-listing, Greater Bay Area Wealth Management Connect, the pending conclusion of the corporate weighted-voting rights (WVR) beneficiaries consultation, launch of the Hang Seng Tech Index, inclusion of WVR and secondary listed companies in the Hang Seng Index and Hang Seng Chinese Enterprises Index, a proposed paperless listing and subscription regime, and the new registration-based regime on Shenzhen’s ChiNext.

Whether Hong Kong's fundraising level in 2020 can surpass 2010, a record year, depends on how the Chinese fintech group will be offered, valued and priced in Hong Kong and Shanghai. Hong Kong is expected to close 2020 having seen 140 new listings raising nearly HKD400 billion. 

We expect more new listings on the SSE STAR Market and Shenzhen's ChiNext following the launch of registration-based regime reform. The Chinese Mainland market is therefore likely to raise more funds in 2020 than it did in 2010, which was a record high. Deloitte forecasts the SSE STAR Market will have 140-170 new listings raising RMB320 billion, or could even exceed RMB400 billion, by the end of the year, followed by ChiNext with 120-150 IPOs raising RMB100-130 billion. The Main Board and SME Board are expected to have seen 120-150 IPOs raising RMB130-160 billion.