Mainland IPO fundraising to surpass 2021’s level and Hong Kong's new listing market to take 3rd position globally in 2022

Published: 7 September 2022

The Capital Market Services Group (CMSG) of professional services firm Deloitte China today released its review of Chinese Mainland and Hong Kong initial public offering (IPO) markets in the first three quarters of 2022 and forecasts for the full year.

Its report indicates that Shanghai Stock Exchange and Shenzhen Stock Exchange are set to retain 1st and 2nd positions in the global IPO ranking by funds raised as of 30 September 2022, based on existing figures and estimates. Korea Stock Exchange will be 3rd, having hosted the IPO of an electronic vehicle battery manufacturer that was the world's largest listing so far in 2022. Hong Kong Stock Exchange will rise to 4th place after jumbo IPOs by a retail business and a battery manufacturer. The Dubai Financial Market will be in 5th, with one listing among the top three global IPOs.

Chinese Mainland IPO activity accelerated in Q3 2022. This means that for Q1-Q3 2022, there will have been an increase in IPO funds raised from the same period of 2021, albeit with a decline in the number of IPOs. In Hong Kong, although the lingering Russia-Ukraine conflict, continued US interest rate hikes and tapering hampered market liquidity and valuations, market sentiment was supported by regulatory reforms and enhancements including the potential introduction of Swap Connect. Hong Kong's IPO market picked up in July, with more activity than in the whole of 1H 2022.

Looking ahead to Q4 2022, the Chinese Mainland will introduce registration-based regime reform steadily, more economic stimulus measures will be implemented, and technology and innovative companies will continue to flock to the SSE STAR Market and ChiNext. There is also a strong pipeline of companies waiting to list or be approved for listing. For the full year, IPO funds raised in the A-share market could break their previous record, which was set in 2021.

In Hong Kong, the upcoming launch of the Fast Interface for New Issuance (FINI), anticipated enhancement of Southbound Stock Connect to include Renminbi (RMB) settlement, continuous listings of China concept stocks, and potential mega listings will invigorate momentum in Q4 2022. As a result, Hong Kong could claim 3rd place in the global ranking of IPO fundraising venues by the end of 2022.

By the end of the first three quarters of 2022, the Chinese Mainland IPO market will be likely to have seen 285 new listings raising RMB464.1 billion. This would represent a 23% drop in the number of new listings (down from 372 in Q1-Q3 2021), but a 26% increase in proceeds raised (up from RMB369.8 billion). Boosted by the strong performance of the SSE STAR Market, Shanghai is set to be the leading exchange, with 114 IPOs raising around RMB296.0 billion, followed by Shenzhen with 140 IPOs raising about RMB162.7 billion, and Beijing Stock Exchange with 31 IPOs raising RMB5.4 billion.

"Registration-based reform has been providing a strong boost to the A-share market since its launch in June 2019. It has supported listings by many technology and innovative businesses seeking to raise funds. This is clear given IPO volume and funds on the SSE STAR Market and ChiNext are expected to have surpassed those on the two main boards in the first three quarters," says Dick Kay, Offering Services leader, Capital Market Services Group, Deloitte China.

By the end of September 2022, Hong Kong is forecast to have recorded about 47 IPOs raising HKD54.7 billion, down from 73 IPOs raising HKD288.5 billion in the same period of 2021. This would represent a 36% decline in the number of IPOs and an 81% drop in funds raised.

"It was inevitable that Hong Kong would follow trends in the global stock markets, which have been hit by the prolonged Russia-Ukraine conflict and sharp US interest rate hikes. But sentiment in Hong Kong's capital market has improved. It will have risen again to become the world's 4th largest IPO venue in Q3 2022, helped by one mega listing in July and another in August," says Robert Lui, Southern Region Offering Services leader and Hong Kong Offering leader of the Capital Market Services Group, Deloitte China.

In the US in Q1-Q3 2022, about 13 Chinese companies will have listed raising USD450.0 million, down from 41 new listings raising USD14.7 billion in the same period of 2021. This represents a 68% drop in the number of new listings and a 97% decline in funds raised.

"Far fewer Chinese companies will have listed in the US, raising considerably less funds, in the first three quarters of 2022 compared with the same period of 2021. This is due to ongoing delisting risks from the Holding Foreign Companies Accountable Act," says Allen Lau, Capital Market Services Group leader, Deloitte China. "However, with the market anticipating an agreement on cross-border audit oversight, there has been an increase in Chinese companies going public in the US since July 2022. We expect the recent agreement on inspections and investigations of audit firms based in China and Hong Kong to encourage more Chinese companies to consider or reconsider the US market as a listing destination."

There are currently 247 companies that have passed listing reviews and are waiting to go public in the A-share market, with nearly 900 active applications. The Capital Market Services Group forecasts that for the full year, about 140 to 160 companies will have listed on the SSE STAR Market, raising RMB230 billion to RMB260 billion. Another 190 to 210 businesses are expected to have listed on ChiNext, raising RMB190 billion to RMB215 billion. The Shanghai and Shenzhen main boards are set to have had about 80 to 100 IPOs raising as much as RMB140 billion to RMB170 billion, with Beijing Stock Exchange hosting about 50 to 80 new listings raising approximately RMB10 billion to RMB15 billion.

"We expect Q1-Q3 2022’s listing trends in the SSE STAR Market, ChiNext, and the two main boards to sustain in Q4 2022. Boosted by various economic stimulus measures, the amount of IPO funds raised is likely to continue to rise, and the A-share IPO market should mark another record year in 2022," adds Tong Chuan Jiang, A-Share Offering leader, Capital Market Services Group, Deloitte China.

The Capital Market Services Group forecasts that Hong Kong will have seen 70 IPOs raising at least HKD110 billion by the end of 2022. A pipeline of more than 140 listing applications, including China concept stocks, biotech companies, and a few potentially jumbo listings, will drive this result. These listings will be mainly from the energy and resources, financial services, and retail sectors.

"Hong Kong could rise to 3rd place among the world's largest IPO venues by the end of 2022. The rise will be supported by improved market sentiments and liquidity upon the various economic stimulus in the Chinese Mainland and other countries and the realignment of investment portfolio of investors in Asia. The anticipated launch of FINI will also help reduce market risks and improve efficiency, which is particularly important amid ever-increasing market volatility. Expanding connectivity with the Chinese Mainland through the potential Southbound Stock Connect with RMB-based settlement, and inclusion of overseas issuers in Stock Connect, will not only enhance Hong Kong's attractiveness as an international IPO venue. It will also help Hong Kong better complement the Mainland capital market, help both markets seize more financing opportunities in the longer run, and strengthen Hong Kong's prominent role in helping RMB internationalization," says Edward Au, Southern Region managing partner, Deloitte China.

Notes to editors:
Unless specified otherwise, all statistics are updated with our estimates and analysis as of 30 September 2022.

Sources for A-share IPO statistics: the China Securities Regulatory Commission, Shanghai Stock Exchange, Shenzhen Stock Exchange, Beijing Stock Exchange, Deloitte estimates and analysis; excludes transfers from the Select Tier of National Equities Exchange and Quotations to Beijing Stock Exchange.

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 US IPO (Chinese companies) statistics: New York Stock Exchange, Nasdaq, Bloomberg, and Deloitte analysis.