Q1 2023 Review and Outlook for Chinese Mainland and Hong Kong IPO markets

In its Q1 2023 analysis and outlook for the performance of Chinese Mainland and Hong Kong initial public offering (IPO) markets, Deloitte China's Capital Market Services Group reports that Shenzhen Stock Exchange and Shanghai Stock Exchange were the world's largest and 2nd largest listing destinations by funds raised in Q1 2023 after hosting two of the world's 10 biggest IPOs each during the quarter. Abu Dhabi Securities Exchange took 3rd place with an IPO from a natural gas company, which was the world's 10 largest listing. Nasdaq took 4th place and the Stock Exchange of Hong Kong was in 5th.

Global capital markets tumbled in Q1 2023 due to global banking issues, continuous US interest rate hikes, and lingering Russia-Ukraine concerns.

As of 31 March 2023, the A share market had 68 new listings raising RMB65.1 billion against 85 IPOs raising RMB179.9 billion in Q1 2022. This represents a drop in the number of IPOs by 20% and a 64% plunge in funds raised. Beijing Stock Exchange had a sharp rise in activity, hosting the largest number of IPOs, while ChiNext raised the most funds. Only Shenzhen Main Board and Beijing Stock Exchange saw growth in IPO proceeds during the quarter.

The CMSG expects IPO activity in the Chinese Mainland to become vibrant in the remaining three quarters following full implementation of the registration-based regime. The market is expected to record more IPO funds in 2023 than it did in 2022, a record year, boosted by a gradual revival in economic and business activities, the Government's policies and measures to stabilize economic growth, and normal issuance of IPOs.

The A-share market will record 430 to 510 IPOs raising approximately RMB620.0 to RMB699.0 billion for the full year of 2023, versus 2022's 424 new listings raising RMB586.8 billion. The SSE STAR Market could have 120 to 140 listings raising RMB305 billion to RMB340 billion. ChiNext is forecast to have 150 to 170 new listings raising about RMB185 billion to RMB210 billion. The main boards in Shanghai and Shenzhen will have about 60 to 80 IPOs raising RMB110 billion to RMB125 billion and there should be about 100 to 120 listings raising RMB20 billion to RMB24 billion on Beijing Stock Exchange.

Hong Kong's performance in Q1 2023 was slow. It hosted 18 IPOs raising HKD6.6 billion in Q1 2023 versus 15 IPOs raising HKD13.6 billion in Q1 2022. This represents a 20% rise in deal volume but a 51% plunge in deal value. In Q1 2023, all the offerings were small and there were no return listings of China concept stocks or IPOs of life science and healthcare companies.

For 2023, the CMSG forecasts that Hong Kong will record 110 new listings raising approximately HKD230 billion. This will be driven by the full reopening of the Chinese Mainland and Hong Kong boundaries, enhancements to Stock Connect, spin-offs of technology companies, and the new listing regime for Specialist Technology Companies. 2H 2023 is expected to be an exciting time for the Hong Kong IPO market with expectations of the end of US interest rate hikes leading to a repositioning of funds' investment strategies to Asia's high-growth regions like China. The Government's supportive direction for privately owned enterprises has added momentum to the technology sector, which will facilitate their listings and spin-offs. As larger Hong Kong-listed international companies are brought into Stock Connect, more overseas companies will start looking to list in Hong Kong. Some special purpose acquisition companies are expected to announce de-SPAC transactions, which will take the market limelight.

Following the US Public Company Accounting Oversight Board's announcement that it has gained access to the working papers of Chinese listing registrants in the US in mid-December 2022, the US IPO market for Chinese companies showed a significant improvement in Q1 2023. Thirteen Chinese firms went public raising HKD553 million against just a single listing raising USD39 million in Q1 2022.

The CMSG is excited to see this rebound and positive about the outlook for the US IPO market for Chinese companies in 2023, especially now Chinese economic activity is picking up.