Article
H1 2024 Review and Outlook for Chinese Mainland & HK IPO markets
Published date: 21 June 2024
Statistics indicate that in the first six months of the year, New York Stock Exchange will have topped the global IPO ranking, hosting four of the world’s top 10 IPOs, followed by Nasdaq with two of the 10 largest listings globally. National Stock Exchange of India will have come in 3rd with a high volume of new listings. Bolsa de Madrid will have risen to 4th place.
Shanghai Stock Exchange is set to be in 5th, with Hong Kong Stock Exchange 9th and Shenzhen Stock Exchange 10th.
The State Council’s announcement in April of nine guidelines to promote high-quality development of the A-share market, and related measures, brought heightened scrutiny of A-share listing applicants and issuances in H1 2024. This prompted a slowdown in Chinese mainland IPO activity in H1 2024 that is set to affect the offering scale for the entirety of 2024. As the nine new measures and policies in 1+N documents for the capital market are being implemented, more positive impacts to the market should emerge. The anticipated results of these series of policies will eventually be reflected in future A-share IPO activities.
The CMSG believes slowdown in overall pace of listings in the A-share market is likely to be temporary. It anticipates more high-quality applicants and issuers will become available for investors, providing more promising returns and contributing to the economy.
Taking the ongoing trend of heightened scrutiny over issuers and IPO applicants and the positive impact of all the policies and measures that are being implemented into consideration, the CMSG maintains its full-year forecast that the A-share market will have about 115 to 155 new listings raising approximately RMB139 billion to RMB166 billion. The main boards in Shanghai and Shenzhen are expected to have 25 to 35 IPOs raising RMB74 billion to RMB84 billion, followed by 35 to 45 new listings raising RMB30 billion to RMB37 billion on ChiNext. The SSE STAR Market is anticipated to have 20 to 25 new listings raising RMB28 billion to RMB35 billion and Beijing Stock Exchange is forecast to have 35 to 50 IPOs raising RMB7 billion to RMB10 billion.
With a rebound in the Hang Seng Index since mid-April, market liquidity and valuations in Hong Kong improved somewhat in H1 2024. Funds from the US, Europe and the Middle East likely remained on the sidelines, hence liquidity and valuations were not conducive to large or mega IPOs.
Although a continued revival of the Chinese economy will be crucial, long-anticipated US interest rate cut, which had been expected in June, will be the most critical factor in determining how far the Hong Kong IPO market can rebound and if more prominent deals are completed this year. Also, given the State Council’s nine rules and China Securities Regulatory Commission’s announcement that it will support top Chinese companies to list in Hong Kong, more A-share IPO applicants could switch their listing plans to Hong Kong.
Nevertheless, the CMSG has adjusted its full-year forecast for the Hong Kong IPO market to HKD60 to HKD80 billion from 80 IPOs.
An active pipeline of more than 100 IPO applicants, specialist technology companies, de-SPAC transactions, large offerings delayed from 2023 and prominent Chinese businesses that are being encouraged by the mainland regulator to list in Hong Kong, plus a pipeline of GEM listing candidates, will drive the Hong Kong IPO market in H2 2024. A-share IPO applicants changing their listing plans to Hong Kong, other Chinese companies listing in Hong Kong and return listings of China concept stocks will be other key drivers.
IPO candidates from the consumer sector, artificial intelligence, hard tech, life sciences and green and sustainable sectors could be the highlights.
As the Chinese economy continued to improve and A-share IPOs came under heighted scrutiny in H1 2024, more Chinese businesses went public in the US. At the same time, more Chinese companies filed their US offerings with the Chinese regulator and be approved in H1 2024. The figure is already up more than 1.5-fold this year from its level in the whole of 2023. This shows the attractiveness and importance of the US capital market in the development of Chinese businesses. Most of these will be small offerings. More companies are expected to flock to list in the US from China before the US presidential election on 5 November.
