2021 Review and 2022 Outlook for Chinese Mainland and HK IPO Markets

According to a review of Chinese Mainland and Hong Kong initial public offering (IPO) markets in 2021 and their outlook for 2022 recently released by the Capital Market Services Group of Deloitte China, Nasdaq and the New York Stock Exchange will take 1st and 2nd place globally in IPO funds raised in 2021 due to more and larger listings. Shanghai Stock Exchange will follow in 3rd with the support of a large volume of new listings on the SSE STAR Market and significant deals on the STAR Market and Main Board. The Stock Exchange of Hong Kong and Shenzhen Stock Exchange will be in 4th and 5th.

In 2021, the Mainland capital market expanded with the establishment of Beijing Stock Exchange. The rise in new listings on ChiNext and the SSE STAR Market in 2021 also reflects the strong, positive results of registration-based regime reform.

The Capital Market Services Group is positive about the outlook for the Mainland IPO market in 2022 and subsequent years given the many significant, deep reforms of the Chinese capital market in recent years. The anticipated launch of the full registration-based IPO regime will help create a more conducive environment for businesses to raise funds more efficiently and effectively from the domestic capital market to support their development. The multi-tier capital market and interconnectivity have helped companies of different industries, scale, and stages of development tap into the fund pool in the public market. This can support the country's goal of sustainable economic growth and meeting the 30-60 decarbonization targets.

Looking into 2022, the A-share IPO market is set to continue to grow with the support of an increasing number of new listings on the SSE STAR Market, ChiNext, and Beijing Stock Exchange. Most of these will come from small and medium-sized manufacturing and technology companies. The SSE STAR Market should have 170-200 listings raising RMB210 billion-RMB250 billion in 2022. There could be another 210-240 new listings on ChiNext raising about RMB160 billion-RMB180 billion. The main boards in Shanghai and Shenzhen are forecast to have about 120-150 IPOs raising RMB200 billion-RMB230 billion.

Hit by ongoing geopolitical issues, regulatory changes affecting several industries in the Mainland, including the new economy and education, and speculation of interest rate hikes and reduced bond purchases, the Hong Kong IPO market slowed in Q2 and Q4 2021. But Hong Kong has remained a resilient international financial center given its unique advantages

Backed by an increasingly mature ecosystem for nurturing innovative and new economy companies, the new listing regime for overseas issuers should boost dual-primary and secondary listings of US-listed China concept stocks and the listing regime for Special Purpose Acquisition Companies (SPACs) will help draw some listings of de-SPAC targets which can be high-growth businesses in Asia Pacific or privatized China concept stocks in 2022. To support the Mainland's 30-60 targets for decarbonization, more listings from sustainable and environmental, social, and governance companies are anticipated. Some listings will come from Hong Kong's home-grown unicorns. These developments will help dissipate some of the negative impacts from geopolitical tensions, uncertainties, and tapering.

Although the geopolitical issues have triggered certain negative factors that appear quite often to affect Hong Kong's capital market, as China's most internationalized city with the free flow of capital, ample liquidity, and an ability to innovate and reform to embrace change, Hong Kong is certain to remain the most preferred overseas listing destination for Chinese companies. The Capital Market expects Hong Kong to have around 120 new listings raising about HKD330 billion.

Measures such as the cybersecurity review regulations, reform of Chinese private education companies, the US Securities and Exchange Commission's adoption of amendments to finalize rules implementing the Holding Foreign Companies Accountable Act, and speculation about suspending overseas listings of variable interest entities have held back the US IPO market for Chinese companies, particularly in 2H 2021. Helped by three large listings by online transportation and recruitment services platforms in 1H 2021, the number of IPOs and proceeds raised by Chinese companies in the US in 2021 will have risen from 2020’s level.