Article
2023 Q3 Review & Outlook for Chinese Mainland & HK IPO markets
Published Date: 25 September 2023
Deloitte China's Capital Market Services Group (CMSG) has released its review of Chinese Mainland and Hong Kong initial public offering (IPO) markets in the first three quarters of 2023 and forecast for the full year.
According to the report, supported by strong performance in Q1-Q2 2023 and the mega listing of a semiconductor manufacturer in August, Shanghai Stock Exchange is expected to have retained 1st place in the global IPO ranking, followed by Shenzhen Stock Exchange with its mega IPO of an energy and resources company and large deal volume on ChiNext.
With the recent listing of a UK semiconductor company becoming the world's largest IPO of the year so far, Nasdaq will have risen into 3rd place. New York Stock Exchange will have been supported by the world's second biggest IPO of the year to date, by a consumer healthcare company, to take 4th place. Abu Dhabi Securities Exchange will have taken 5th place and Stock Exchange of Hong Kong will have ranked 8th.
By the end of Q3 2023, the CMSG expects the A share market will have had 263 new listings raising RMB323.4 billion, versus 300 IPOs raising RMB485.4 billion in the same period of 2022. This would represent a 12% drop in the number of IPOs and a 33% decline in funds raised.
Recently IPOs were issued at a regular pace based on scientific and rational decision-making to better balance the development of the primary and secondary markets. The recent tightening of IPOs according to stage helps protect the market to operate steadily. The China Securities Regulatory Commission and stock exchanges continue their work on accepting, reviewing, and registering IPOs. Many companies have completed their IPOs since September.
Given these conditions, for the full year 2023, the A-share market will record 320 to 370 IPOs raising RMB394 to RMB446 billion, versus last year’s 424 new listings raising RMB586.8 billion. The SSE STAR Market is expected to have 70 to 80 listings raising RMB160 billion to RMB180 billion, followed by ChiNext with 125 to 135 new listings raising RMB150 billion to RMB160 billion. The main boards in Shanghai and Shenzhen will have 50 to 70 IPOs raising RMB70 billion to RMB90 billion, with another 75 to 85 listings raising RMB14 billion to RMB16 billion on Beijing Stock Exchange.
As for Hong Kong, the stock market remained weak in Q3 2023, as did stock valuations, because of macroeconomic developments, in particular around US interest rate hikes. Many IPO candidates continue to wait-and-see for a turnaround in market valuations while preparing and planning their offerings.
Hong Kong is expected to have had 44 IPOs raising HKD24.7 billion in the first three quarters of 2023, versus 51 IPOs raising HKD64.0 billion in Q1-Q3 2022. This would represent a 14% drop in deal volume and a 61% plunge in deal value. Only one large offering and two China concept stocks will have listed by the end of Q3 2023.
Although the US Fed decided not to lift interest rates following its meeting earlier last week, it has indicated another rise later this year and it is set to maintain a high interest rate for a longer time. This will add uncertainty and affect the listing windows of potential issuers in Hong Kong
Together with a heavy base of IPO companies from the mainland, where economic recovery is still developing, the CMSG forecasts that in 2023 the Hong Kong IPO market could hit its lowest fundraising level for 11 years.
Now is a good time to think about how to attract and get more overseas companies to list in Hong Kong on top of signing agreements with other foreign stock exchanges. Hong Kong might consider including expanding the market and further enhancing the connectivity with the mainland market, enriching RMB-denominated investment products, attracting more funds from mainland and other markets, and establishing a multi-tier and diverse IPO market. The capital market should change to help professional investors, venture capital, and private equity investors unleash and drive the market to support the Hong Kong IPO market and its ecosystem for long-term, healthier development.
Chinese companies continued to float stocks in the US in Q3 as delisting risks were mitigated. Twenty-five companies will have listed in Q1-Q3 2023 raising USD651 million, against 13 deals raising USD449 million in Q1-Q3 2022. This would represent a 92% surge in deal volume and a 45% rise in proceeds raised.
