1H 2019 Review and Outlook of the Chinese Mainland and HK IPO Markets

The National Public Offering Group of Deloitte China recently released its review and outlook for the Chinese Mainland and Hong Kong's initial public offering ("IPO") markets for the first half of 2019. Its analysis indicates that the Hong Kong and Shanghai stock exchanges are expected to rank third and fourth respectively in global initial public offerings (IPOs) by funds raised in 1H 2019, affected by turbulence in the macroeconomic and political environment and other major stock markets. The New York Stock Exchange and NASDAQ are forecast to have stood firm in first and second place with their completion of several jumbo deals.

As it enters the second half of 2019, Hong Kong will be no exception to other major capital markets in remaining overshadowed by the developments and uncertain outcomes of events like Sino-US trade negotiations, Brexit and tense US-Iran relations. The eventual scale of mega issuances waiting in the wings will depend on actual market conditions when they go public. Meanwhile, Shanghai's position as a financial center is set to strengthen further when trading on the Sci-Tech InnovAtion BoaRd (STAR) of Shanghai Stock Exchange (SSE), a new sub-market for innovation and science companies, commences in July.

Despite concerns around trade negotiations, additional tariff arrangements and embargos, statistics and the IPO application pipeline continue to support a positive outlook for the Hong Kong IPO market in 2H 2019. Deloitte maintains its full-year forecast at approximately 200 new listings raising HK$180 billion-HK$250 billion.

As for the Mainland IPO market, Deloitte expects there should be room for the SSE STAR Market to demonstrate its fundraising capability in its early days and about 70-90 new listings to complete on the new board in 2019. Another 110-150 IPOs on the other three Mainland markets should raise total proceeds of at least RMB120 billion this year.

Deloitte also believes that the substantial impact of the trade war and new Shanghai board on Chinese companies' US listing plans and sentiment will surface later this year.