Q1 2024 Review and Outlook for Chinese Mainland & HK IPO markets

As of 31 March 2024, in terms of the IPO funds raised, New York Stock Exchange led the global ranking after hosting four of the world’s top 10 IPOs, including the listing of a Finnish multinational sporting equipment company – the world’s 2nd largest new listing last quarter.

Nasdaq came in 2nd after hosting three of smaller top 10 global IPOs, followed by Switzerland’s SIX Swiss Exchange in 3rd after the listing a skincare company that was the world’s largest IPO of Q1 2024. The National Stock Exchange of India took 4th position with a large volume of new listings. The new listings of a handful of large manufacturing and technology, media and telecommunications companies enabled Shanghai Stock Exchange to earn 5th place in the ranking.

Following the announcement of several regulatory measures that heightened scrutiny of A-share listings and issuer quality, taking market demand and supply into consideration and adopting an adjusted counter-cyclical approach, mainland IPO activity slowed further in Q1 2024. Compared to its performance over the last two years, overall A-share IPO market activity is forecast to slow considerably throughout 2024.

In the long run, these regulatory measures will create a healthier market by setting a higher benchmark for listed companies, delivering enhanced benefits from the stock market to the overall economy and contributing more to economic growth.

The CMSG forecasts that the A-share IPO market will have around 115 to 155 new listings raising about RMB139 to RMB166 billion, lower than its previous expectation. All five markets will have fewer new listings this year:

• The main boards in Shanghai and Shenzhen are expected to have 25 to 35 IPOs raising RMB74 billion to RMB84 billion
• ChiNext is forecast to have 35 to 45 new listings raising RMB30 billion to RMB37 billion
• The SSE STAR Market is anticipated to have 20 to 25 IPOs raising RMB28 billion to RMB35 billion
• Beijing Stock Exchange is likely to have another 35 to 50 new listings raising RMB7 billion to RMB10 billion.

Hong Kong has continued to be hit by external uncertainties and weak sentiment, particularly around an end to the US interest rate hike cycle. Its IPO market had a slow start in Q1 2024, recording no mega or large listings in a low valuation environment. Despite various anticipated economic stimuli from the Chinese mainland to promote high-quality economic development, and different measures to improve Hong Kong stock market turnover and competitiveness, the timetable of US interest rate cuts in the next three quarters will be a key factor in the flow of the funds and determining how the Hong Kong IPO market rebounds in 2024. Companies that have filed for A-share listings but switch their IPO plans to Hong Kong could become a trend.

The CMSG expects Hong Kong to have 80 IPOs raising HKD100 billion in 2024, backed by anticipated Chinese economic stimulus measures, ongoing stock market reforms including enhancements to the listing regimes, transaction mechanisms and Connect programmes between the Chinese mainland and Hong Kong, a slowdown of A-share IPO activity, and anticipated US interest rate cuts. The market highlights will include listings from prominent companies, de-SPAC transactions, international companies and Chinese companies that switch their listing plans from the A-share market to Hong Kong, and GEM companies.

Many potential issuers are awaiting a market valuation rebound, but some companies are committed to listing in Hong Kong despite the current environment, driven by pressing fundraising needs to support their business development. Hong Kong remains a top choice for listings due to its standing as an international financial centre, numerous unique strengths and fundamentals, and ongoing market reforms.

As A-share IPO activity continued to slow in Q1 2024, US listings by Chinese companies remained active. The US IPO market for Chinese companies could benefit from similar circumstances to the Hong Kong market, i.e., more companies that had planned to list in the Chinese mainland might divert to the US instead to raise funds more swiftly. Most of these Chinese companies are expected to complete their US listings before the US Presidential Election this year.