Pace of IPOs in Chinese mainland to sustain with new capital market measures and policies in effect; Hong Kong could remain in global top 4 by the end of 2024 following US rate cuts and anticipated recovery in Chinese economy

The Deloitte China Capital Market Services Group (CMSG) today released its review of the Chinese mainland and Hong Kong initial public offering (IPO) markets for the first three quarters of 2024 and its outlook for Q4 2024.

The CMSG’s analysis indicates that Nasdaq will take gold in the global IPO race by the end of Q3 2024, mainly due to the listing of a cold-storage logistics giant, which is the world’s largest IPO so far this year. New York Stock Exchange is set to follow in 2nd after IPOs for a leading travel company, a prominent sports brand and a safety science company, which all ranked among the top 10 IPOs globally. National Stock Exchange of India in 3rd is set to outshine its Asian peers with high deal volume. Hong Kong Stock Exchange is poised to move up into 4th place following the completed listing of a Chinese leading home appliance group, the world’s 2nd largest IPO year-to-date. Shanghai Stock Exchange is set to remain in 5th with Shenzhen Stock Exchange in 8th position.

The State Council’s nine new measures and related initiatives introduced since April 2024 have maintained the pace of A-share IPOs. Implementing key measures, heightening scrutiny of the capital market, mitigating risks and uplifting high-quality development remain the regulator’s priorities. This has slowed IPO activity considerably compared to the first three quarters of 2023. These policies will likely remain in place in Q4 2024 and the current pace of IPOs is set to also be maintained.

The Hong Kong stock market, meanwhile, has seen improved performance since April on measures and policies for IPOs by A-share listed companies and other listing candidates, efforts to boost capital market development, and most recently the US Federal Reserve’s first interest rate cut since March 2020. If a further rate cut is made this year and other fundamentals such as stronger Chinese economic indicators following China's central bank's recent economic stimuli, are shown to improve liquidity inflows, this will help increase the number of large and jumbo listings, which could include listings by leading Chinese companies that have been encouraged by regulators to list in Hong Kong. Hong Kong could therefore gain a foothold in the top 4 IPO ranking for 2024.

In the first three quarters of 2024, the Chinese mainland is anticipated to have seen 70 completed new listings raising RMB48.0 billion. The number of IPOs is set to have dropped by 73% from 264 in the same period of 2023, with proceeds down by 85% from RMB323.6 billion. In Q3, as they did in 1H, ChiNext is likely to have continued to host the largest number of IPOs with Shanghai’s Main Board again raising the most proceeds.

“The resilience of the A-share market is demonstrated by the fact that the Shanghai and Shenzhen markets remained firmly in the global IPO race in Q3 2024 amid higher scrutiny of the entire capital market, which began last August. When mega offerings can be made to the market again, we look forward to seeing more remarkable results from the Shanghai and Shenzhen stock exchanges relative to their international peers,” says Dick Kay, National Offering Services leader of the Capital Market Services Group, Deloitte China.

With measures introduced by the State Council, China Securities Regulatory Commission and stock exchanges being enforced and no change in the pace of IPOs, the A-share IPO market is expected to see fewer IPOs and lower proceeds in 2024, with about 95 to 135 new listings raising approximately RMB65 billion to RMB96 billion. For the full year, the Main Boards in Shanghai and Shenzhen are expected to have 25 to 35 IPOs raising RMB25 billion to RMB43 billion. ChiNext is anticipated to record about 30 to 40 new listings raising RMB18 billion to RMB23 billion, followed by the SSE STAR Market (15 to 20 new listings raising RMB17 billion to RMB22 billion) and Beijing Stock Exchange (25 to 40 IPOs raising RMB5 billion to RMB8 billion.

“After years of intensive, in-depth reform, the A-share market has become a multi-tier market. As the measures and policies of the State Council, China Securities Regulatory Commission, stock exchanges and other regulators show their effects further, the A-share market should be able to attract more IPOs from representative technology companies and boost its capacity and functions for high-quality development,” adds Tony Huang, A-Share Offering leader of the Capital Market Services Group, Deloitte China.

In Hong Kong, the market is forecast to have recorded 45 IPOs raising HKD50.9 billion in Q3 2024, with deal volume up 2% from 44 new listings in Q3 2023 and deal value surging 107% year-on-year from HKD24.6 billion. The mega listing of a leading Chinese home appliance group, the first two special technology company IPOs and three GEM listings were the market highlights.

“We are delighted to see Hong Kong regain its position as a top 4 IPO venue, having hosted one of the 10 largest IPOs globally once again after a slow 2023. This demonstrates its strong and solid fundamentals and ecosystem and the results of years of capital market reforms, including having special technology companies go public and the return of GEM listings by small and medium-sized, high growth businesses,” says Robert Lui, Southern Region Hong Kong Offering Services leader of the Capital Market Services Group, Deloitte China.

“Although raising large funds is important to sustain Hong Kong’s competitiveness in the global IPO market, it is equally important that we continue to see the market diversity and become more adaptable to a broader array of businesses by listing companies from different sectors and various business development stages.”

With nearly 100 listing applicants, including some potential large and mega IPOs, consumer, artificial intelligence, hard tech, life sciences and green and sustainable companies, and the recent listing of the world’s 2nd largest IPO year-to-date, the CMSG maintains its full-year forecast for the Hong Kong IPO market at HKD60 to HKD80 billion in funds raised from 80 IPOs.

“Hong Kong can achieve this forecast after many recent exciting developments, including the US interest rate cut, prominent offering from a leading Chinese home appliance group and approvals of potentially significant listings, including IPOs by a famous logistics group and a beverage company. However, critical factors remain, including the potential for further US interest rate cuts, the outcome of the US Presidential election and any resulting shifts in China-related policy, along with the pace of China’s recovery from its recent economic slowdown and the implementation of economic and capital market stimuli by its central bank,” adds Edward Au, Southern Region managing partner, Deloitte China.

“We look forward to even more stellar results in Hong Kong by the end of 2024 when the market conditions could once again become conducive to large and mega deals. Reforms by Chinese mainland and Hong Kong regulators, including those under Stock Connect, such as making dual-counter equities available to Chinese mainland investors and expanding eligible exchange traded funds, and collaboration agreements with Middle East and Malaysia stock exchanges, are expected to form a strong backbone for sustained growth in Hong Kong’s IPO market.”

In Q3 2024, as A-share IPO activity slowed, listing in the US remained a popular alternative for Chinese companies, especially those in the technology sector. Thirty-six Chinese companies listed in the US raising US823 million, versus 25 IPOs raising US714 million in Q3 2023, with increases of 44% in deal volume and 15% in value.

“The recent interest rate cut by the US Fed will further boost overall market liquidity and eventually investment sentiment. As A-share market activity remains muted, we expect Chinese companies to continue to turn to the US to seek funds for development. However, despite the largest new listing of the year so far, the average size of US listings by Chinese companies has reduced. We therefore look forward to seeing more sizable Chinese companies listing in the US as another preferred choice after the domestic market,” 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 30 September 2024 and excludes listings from by investment trust companies, closed-ended investment companies, closed-ended funds, and special purpose acquisition companies.

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: Shanghai Stock Exchange, Shenzhen Stock Exchange, Nasdaq, New York Stock Exchange, the Stock Exchange of Hong Kong, National Stock Exchange of India, Bloomberg, Dealogic and Deloitte estimates and analysis.