Q1 2022 Review and Outlook for Mainland & HK IPO Markets

In its Q1 2022 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 Shanghai Stock Exchange emerged to become the world's largest IPO venue by funds raised in Q1 2022, following the listings of three prominent IPOs. Shenzhen Stock Exchange took 3rd place with a large IPO that became one of the world's 10 biggest listings. The Korea Stock Exchange, Saudi Exchange, and NASDAQ took 2nd, 4th, and 5th position respectively.

In Q1 2022, unlike its peer Hong Kong, the Mainland's new listing market faced a less direct and smaller impact from major macro-economic and geopolitical events, including US tapering and interest rate hikes and the Russia-Ukraine conflict. 

The full implementation of the registration mechanism for all Mainland markets is set to help expand the market further, with more large listings raising between RMB1 billion and RMB5 billion in 2022. Listings by technology, media and telecommunications (TMT) and life science and health care (LSHC) companies are set to grow, having already increased their proportions of the number of IPOs in Q1 2022.

The SSE STAR Market, ChiNext, and Beijing Stock Exchange are set to remain the growth engine of the country's IPO market development in 2022 by number of deals. The SSE STAR Market could have 170-200 listings raising RMB210 billion-RMB250 billion in 2022, with 210-240 new listings raising about RMB160 billion-RMB180 billion on ChiNext. The main boards in Shanghai and Shenzhen should have about 120-150 IPOs raising RMB200 billion-RMB230 billion. Small and medium-sized manufacturing, technology, and LSHC companies will dominate the number of new listings.

The Hong Kong stock market plunged in early February 2022 due to speculation and worry about US interest rate rises and tapering and the Russia-Ukraine conflict. The 5th wave of the pandemic also cut back much of local business activity, further weighing on the performance of the IPO market. 

However, the Hong Kong capital market has many strong, proven fundamentals and leading edges that enable it to pick up much quicker than peers once adverse market conditions like the Russia-Ukraine conflict ease. The Capital Market Services Group predicts Hong Kong will have about 120 listings raising about HKD330 billion in 2022. Return listings of China concept stocks will be the key theme, with IPOs from TMT, LSHC, and environmental, social and governance companies the spotlights.

Vitally, the Hong Kong's ecosystem for nurturing new economy companies continues to mature. This ecosystem will provide a strong backbone for Hong Kong's new economy IPOs, listings of special purpose acquisition companies (SPACs), and de-SPAC transactions. Looking ahead, the market is expected to see up to 20 SPAC listings complete in 2022, each raising at least HKD1 billion.

In the US, the implementation of the Holding Foreign Companies Accountable Act dealt a blow to the IPO market for Chinese companies in Q1 2022. There was just one Chinese listing candidate, from the medical device sector. We look forward to consent on audit oversight being reached by regulators of the two countries on the back of ongoing positive discussions. This will bolster investors' confidence in China concept stocks and eventually help the IPO activities of Chinese businesses resume in the US. However, we also believe many China concept stocks will continue to seek alternative listing platforms, particularly in Hong Kong, to help divest their investment risks for longer-term benefits.