Mainland IPOs to maintain pace in 2024; Hong Kong market to rebound when US interest rate hikes end and funds redirect

Deloitte China's Capital Market Services Group (CMSG) today released its review of the performance of Chinese mainland and Hong Kong initial public offering (IPO) markets in 2023 and forecasts for 2024.

As of 8 December 2023, assuming announced listings complete before the end of the year, the Shanghai and Shenzhen stock exchanges are expected to have led the global IPO market in 2023 by funds raised. This will be a result of them listing four of the world’s 10 largest IPOs in the first three quarters of 2023. Nasdaq will have retained 3rd place with the listing of a UK semiconductor company and New York Stock Exchange will have remained in 4th place after its listing of a personal care company. The National Stock Exchange of India is set to have come in 5th following a large number of deals, followed by Hong Kong Stock Exchange in 6th position.

As a result of issuing IPOs at a regular pace based on scientific and rational decision-making to balance the development of the primary and secondary markets, the A-share IPO market is expected to have recorded fewer deals and lower deal volume in 2023 than it did in 2022. The Hong Kong market, meanwhile, has been hit by intensive US interest rate rises, a slower-than-expected Chinese economic recovery, sharp cuts in market valuations and reduced market liquidity, and is expected to post its weakest annual performance for two decades.

Existing IPO issuance policies for the A-share market are likely to remain in force in 2024. Offerings from Beijing Stock Exchange should be the most active segment, resulting in a slower or similar performance for the overall A-share IPO market in 2024. On the other hand, as the US Fed started to slow interest rate hikes in Q3 2023 and the market expects an end to the rate-hike cycle in 1H 2024, IPO activity in Hong Kong is heading for a rebound, supported by a pipeline that includes specialist technology companies, postponed large offerings from 2023, return listings of prominent China concept stocks, new listings from de-SPAC transactions, listings from international companies, and GEM listings.

By 31 December 2023, the Chinese Mainland will have had about 310 new listings raising approximately RMB355.1 billion versus 424 IPOs raising RMB586.8 billion in 2022. This would represent a 27% drop in the number of IPOs and a 40% decline in funds raised. Shanghai Stock Exchange will have had 103 deals raising RMB193.3 billion and Shenzhen Stock Exchange will have had about 132 new listings raising RMB147.7 billion. Beijing Stock Exchange will have listed 75 new companies raising RMB14.1 billion. ChiNext will continue to have had the largest number of IPOs and the SSE STAR Market will have raised the most IPO funds. IPO proceeds from the ChiNext and SSE STAR Markets will exceed those from the two main boards.

“Amid a slower overall performance of the A-share IPO market in 2023 resulting from a regulated offering pace in a scientific and rational manner since August, we are pleased that the strong performance achieved by Shanghai Stock Exchange and Shenzhen Stock Exchange has still enabled them to claim to be the world’s two largest IPO venues in 2023,” says Dick Kay, Offering Services leader, Capital Market Services Group, Deloitte China.

In Hong Kong, the market is expected to have seen 65 IPOs raising approximately HKD45.8 billion in 2023, versus 84 new listings raising HKD99.6 billion in 2022. This would mark a 23% cut in the number of IPOs and a 54% decline in proceeds raised. The market recorded just three large listings. Only one China concept stock listed by way of introduction.

“Continuous US interest rate hikes and a slower-than-expected Chinese economic recovery sent market valuations down and constrained liquidity. As a result, Hong Kong did not have any mega IPOs in 2023. However, we believe many of the reforms made in recent years, including the listing regimes for special purpose acquisition companies and specialist technology companies, the introduction of FINI, memorandums of understanding with overseas stock exchanges, and GEM reform, will pay off eventually,” says Robert Lui, Southern Region Hong Kong Offering Services leader of the Capital Market Services Group, Deloitte China.

The CMSG forecasts that the A-share IPO market will have about 260 to 330 new listings raising approximately RMB267 to RMB317 billion in 2024. The SSE STAR Market is expected to have 35 to 40 listings raising RMB49 billion to RMB56 billion, followed by ChiNext with 65 to 80 new listings raising RMB78 billion to RMB95 billion. The main boards in Shanghai and Shenzhen will have 70 to 90 IPOs raising RMB122 billion to RMB142 billion, with another 90 to 120 listings raising RMB18 billion to RMB24 billion on Beijing Stock Exchange.

“We expect new listings to continue to be offered regularly in a scientific and rational manner in the A-share market in 2024. At the same time, backed by a basket of practical measures to build a high-quality bourse, Beijing Stock Exchange will gain further momentum, driving most of the deal flow,” says Tony Tang, A-Share Offering leader, Capital Market Services Group, Deloitte China.

The CMSG anticipates Hong Kong will record 80 IPOs raising HKD100 billion in 2024. Funds are likely to be redirected amid increased market liquidity and improved market valuations following an end to the US interest rate hike cycle in 2024. Hong Kong’s pipeline of more than 90 listing applicants, including specialist technology companies, de-SPAC transactions and delayed large offerings from 2023, and the potential launch of GEM reform, will help support the market recovery. Listings from international companies and by Chinese companies due to a slowdown in the A-share IPO market will also drive the market.

“We are positive about the performance of the Hong Kong IPO market in 2024 as US interest rate hikes cease and the A-share IPO market becomes less active. When liquidity, including funds from Europe, the US and the Middle East, can be redirected to Asia, augmented by numerous new regimes, reforms and promotion for the capital market introduced by Hong Kong Stock Exchange and Hong Kong SAR Government’s measures in enhancing the liquidity of Hong Kong’s stock market to help improve the market liquidity and valuation, Hong Kong IPO activity should soon become vibrant and robust,” adds Edward Au, Southern Region managing partner, Deloitte China.

Due to the A-share IPO policies that came into effect in August 2023 and the US Public Company Accounting Oversight Board’s completion of inspections of the audit papers of US-listed China concept stocks in Hong Kong, more Chinese companies listed in the US in 2023. For the full year, 37 Chinese businesses are expected to have listed, raising USD827 million, versus 16 IPOs raising USD536 million in 2022.

“We expect more smaller Chinese companies to flock to list in the US in 2024 as they are keen to seek funds and overseas investors to support their development while their home capital market lists fewer companies than before. Given the potential geopolitical uncertainty around the upcoming US Presidential Election, most of these deals will debut before the polls open,” says Allen Lau, Capital Market Services Group leader, Deloitte China.

Notes to editors:

Unless specified otherwise, all statistics are updated with our estimates and analysis as of 31 December 2023.

Sources for A-share IPO statistics: the China Securities Regulatory Commission, Shanghai Stock Exchange, Shenzhen Stock Exchange, Beijing Stock Exchange, Deloitte estimates and analysis.

Sources for Hong Kong IPO statistics: the Stock Exchange of Hong Kong, Deloitte estimates and analysis; excludes GEM to MB transfers and SPAC listings.

Sources for global and US IPO (Chinese companies) statistics: CSRC, Shanghai Stock Exchange, Shenzhen Stock Exchange, New York Stock Exchange, Nasdaq, National Stock Exchange of India, Hong Kong Stock Exchange, Bloomberg, Dealogics and Deloitte estimates and analysis.