IPO markets in Hong Kong and on Chinese Mainland

According to the latest analysis of the new share markets of Hong Kong and the Chinese Mainland by the National Public Offering Group of Deloitte China, stock exchanges from Hong Kong, Shenzhen and Shanghai overtook that of New York to be amongst the top five initial public offering (IPO) bourses based on the proceeds raised in the first three months of 2016. Looking ahead, while Hong Kong is likely to move further ahead driven by a strong pipeline of companies going public and support from the Chinese government to encourage more Mainland firms to list here, bourses in Shenzhen and Shanghai are expected to see slower activity as compared to the same period last year given the ongoing deepening reform in the Chinese Mainland’s capital market.

Various events including the Chinese economic slowdown, strong concern about another U.S. interest rate hike and outflow of capital from the emerging markets have put pressure on Hong Kong’s stock market including IPO activities during the first two months of the quarter. But the market got excited by encouraging developments such as the Chinese reserve requirement ratio cut, anticipation over measures to be released after ‘Two Sessions’ as well as further quantitative easing by the European Central Bank, whetting the appetite for new share offering activities in March.

The Chinese government’s commitment to reform state-owned enterprises (SOEs) and the financial market are spurring SOEs and financial services institutions to flock to Hong Kong. Environmentally friendly and healthcare and pharmaceutical companies are two other key themes of this year’s IPO market under the government’s plan of developing the former into one of the major pillar sectors and reforming the care, insurance and medicine within the latter. As such, Deloitte reaffirms that Hong Kong to record 115-125 IPOs raising approximately HK$260 billion by end of this year.

Looking across the border, following a restart of IPO activities in November 2015, new share offerings on the A-share market in 2016 have not been as heated as they were during the same period last year. This was due to the control over the pace and price of new listing and a volatile market. The IPO review and offering pace in this quarter suggests that fewer IPOs are to be debuted by the end of 2016. This translates into 180-220 new listings on the Chinese Mainland raising approximately RMB106.0 billion at most. In terms of the number of new offerings, small and medium-sized manufacturing and technology firms are likely to dominate.