2023 Review and 2024 Outlook for Chinese Mainland & HK IPO markets

Deloitte China's Capital Market Services Group (CMSG) recently released its review of the Chinese Mainland and Hong Kong initial public offering (IPO) markets in 2023 and outlook for 2024.

According to the report, as of 8 December 2023, assuming announced listings complete before the end of the year, Shanghai and Shenzhen stock exchanges are expected to have led the global IPO market in 2023 by funds raised after listing four of the world’s 10 largest IPOs in the first three quarters of 2023. Nasdaq will have retained 3rd place with the listing of a UK semiconductor company and New York Stock Exchange will have remained in 4th place after its listing of a personal care company. The National Stock Exchange of India is set to have come in 5th after multiple deals, followed by Hong Kong Stock Exchange in 6th position.

As a result of issuing IPOs at a regular pace based on scientific and rational decision-making to balance the development of the primary and secondary markets, the A-share IPO market is expected to have recorded fewer deals and lower deal volume in 2023 than it did in 2022. Deloitte is pleased that the strong performance achieved by Shanghai Stock Exchange and Shenzhen Stock Exchange enabled them to retain their status as the world’s two largest IPO venues in 2023.

CMSG expects that new listings will continue to be offered regularly in a scientific and rational manner in the A-share market in 2024. The A-share IPO market is forecasted to have about 260 to 330 new listings raising approximately RMB267 to RMB317 billion in 2024. At the same time, backed by a basket of practical measures to build a high-quality bourse, Beijing Stock Exchange will gain further momentum, driving most of the deal flow.

• The SSE STAR Market is expected to have 35 to 40 listings raising RMB49 billion to RMB56 billion.
• There could be 65 to 80 new listings on ChiNext raising about RMB78 billion to RMB95 billion.
• The main boards in Shanghai and Shenzhen will have 70 to 90 IPOs raising RMB122 billion to RMB142 billion.
• Beijing Stock Exchange should have about 90 to 120 listings raising RMB18 billion to RMB24 billion.

Continuous US interest rate hikes and a slower-than-expected Chinese economic recovery sent market valuations down and constrained liquidity. As a result, Hong Kong did not have any mega IPOs in 2023. However, many of the reforms made in recent years including the listing regimes for special purpose acquisition companies and specialist technology companies, the introduction of FINI, memorandums of understanding with overseas stock exchanges, and GEM reform, will pay off eventually.

The CMSG anticipates Hong Kong will record 80 IPOs raising HKD100 billion in 2024.

• As the US Fed started to slow interest rate hikes in Q3 2023 and the market expects an end to the rate-hike cycle in 1H 2024, IPO activity in Hong Kong is heading for a rebound. Hong Kong’s pipeline of more than 90 listing applicants, including specialist technology companies, de-SPAC transactions, and delayed large offerings from 2023, and the potential launch of GEM reform, will help support the market recovery.
• Listings from international companies and by Chinese companies due to a slowdown in the A-share IPO market will also drive the market.

The CMSG has a positive outlook on the performance of the Hong Kong IPO market in 2024 as US interest rate hikes cease and the A-share IPO market becomes less active. When liquidity, including funds from Europe, the US, and the Middle East, can be redirected to Asia, augmented by numerous new regimes, reforms and promotion of the capital market introduced by Hong Kong Stock Exchange and the Hong Kong SAR Government’s measures to enhance the liquidity of Hong Kong’s stock market to buoy valuations, Hong Kong IPO activity should soon become vibrant and robust.

Due to A-share IPO policies that came into effect in August 2023 and the US Public Company Accounting Oversight Board’s completion of inspections of the audit papers of US-listed China concept stocks in Hong Kong, more Chinese companies listed in the US in 2023.

The CMSG expect more smaller Chinese companies to flock to list in the US in 2024 than before. Most of these IPOs will debut before polls open in the upcoming US Presidential Election.