IPO markets in Hong Kong and on Chinese Mainland
2015 Q1 review and outlook
According to the latest analysis of new listing markets in Hong Kong and the Chinese Mainland by the National Public Offering Group of Deloitte China, for the first three months of 2015, Hong Kong was off to a slower start with 25 initial public offerings (IPOs) raising HK$19.0 billion without any mega-listing over the period. Funds raised from share flotations were 59% down from the HK$46.0 billion raised during Q1 of 2014, but still exceeding the amounts raised over the same period in 2012 and 2013.
At the same time, for the first time in many years, IPO proceeds raised by the Shanghai Stock Exchange surpassed those of Hong Kong Stock Exchange and took over the long-standing leadership position of the New York Stock Exchange (NYSE) following the China Securities Regulatory Commission’s (CSRC) effort to expedite IPO procedures to the marketplace. This has contributed to the Shanghai Stock Exchange raising HK$41.8 billion (RMB33.4 billion) from 35 IPOs and the Shenzhen market generating HK$18.3 billion in proceeds (RMB14.9 billion) from 35 IPOs. These combined performances represented rises of 46% and 44% respectively from 48 IPOs and RMB33.5 billion raised by both stock exchanges over the same period of last year.
In the upcoming months, investment sentiment towards IPOs in Hong Kong would be influenced by a number of factors, including the timing of any U.S. interest rate hike, measures to address the Chinese economic slowdown, investment policies to direct Mainland funds to Hong Kong, and the volume of IPOs across the border, while the Mainland market is shifting to a new registration-based system, which has generated considerable market enthusiasm.
Deloitte forecasts the seven-to-eight large IPOs expected from the Chinese financial sector and the existing pipeline would be able to help Hong Kong to complete 110 IPOs raising approximately HK$180-220 billion by end of this year. The liberalization of interest rates, emerging Internet finance, and service expansion plans of Chinese securities firms, enhancement to the Shanghai-Hong Kong Connect and the anticipated launch of the Shenzhen- Hong Kong Stock Connect are important factors spurring these huge listings.
As for the A-share market, Deloitte believes it is on the way to making 260-300 new listings raising RMB150-180 billion for the year 2015. According to the applications filed with the CSRC, the market may see a large flotation from an energy and resources company.