Chinese Mainland and Hong Kong IPO markets to perform strongly in 2H 2021

Published: 18 June 2021

The National Public Offering Group of Deloitte China has today released its analysis on the interim performance and outlook of the Chinese Mainland and Hong Kong's new listing markets in 2021.

The stock exchanges in Hong Kong and Shanghai are expected to take 3rd and 4th place in the global initial public offering (IPO) race among global stock exchanges respectively after Nasdaq and New York Stock Exchange, which will claim the top spot and 2nd place respectively as at the end of June 2021.

In 2H 2021, the two markets should continue their vibrant performance boosted by the ongoing regulatory reform efforts, including the recent introduction of various new economy-stock tracking indices in Hong Kong and the registration-based regimes for the SSE STAR Market and ChiNext, which have enhanced the ecosystems for the new economy sector.

Hong Kong, in particular, is to continue to benefit from ample liquidity and positive sentiment for the market supported by ongoing monetary and economic easing measures to combat the negative economic impact of the pandemic, and improvements in economic performance of many major national economies. While Hong Kong recorded a slower IPO market in Q2 2021, many new economy companies are expected to accelerate their listings plans soon. Mega, dual primary, secondary and spin-off listings of new economy companies are to become highlights in Hong Kong in 2H 2021.

By 30 June 2021, 46 IPOs are projected to raise about HKD209.7 billion in Hong Kong. This is against 59 IPOs having raised HKD88.0 billion in 1H 2020 representing a 22% drop in the number of new listings and a 138% surge in proceeds. Nearly 70% of funds came from six mega listings a majority of which were new economy companies with four incorporating weighted voting rights (WVRs) structures.

"Overall, Hong Kong's IPO market achieved a remarkable result in 1H 2021 underscoring its position as an international financial center. This impressive performance includes being able to attract and complete four of 10 largest listings in the world in 1H 2021. All of these were innovative and technology companies. We look forward to the listings of home-grown technology unicorns in 2H as Hong Kong continues to form and shape an investment and financing ecosystem for new economy businesses gradually," says Edward Au, Southern Region managing partner, Deloitte China.

At the same time, the Chinese Mainland has recorded growth in both the number of new listings and overall deal size. It is expected to have 244 IPOs raising RMB207.9 billion in 1H 2021 against 117 new listings raising RMB138.1 billion as at June 2020. The number of IPOs grew by 109% with proceeds increasing by 51%. The Shanghai Stock Exchange, which includes the Main Board and SSE STAR Market, should complete 139 IPOs raising approximately RMB141.8 billion. The Shenzhen Stock Exchange should see about 105 IPOs raising RMB66.1 billion.

"We are pleased to see how IPO activities have resumed their robustness again in Q2 2021 with all four markets more active than 1H 2020 with moderate acceleration in IPO pace at the SSE STAR Market and ChiNext. These improvements are truly the benefits of the new Securities Law and the introduction of a registration-based regime in ChiNext," commented Dick Kay, national leader of the Deloitte China National Public Offering Group.

The US IPO market for Chinese companies has had 33 IPOs raising USD9.05 billion in 1H 2021. That represents a 106% rise in number of new listings from 16 IPOs and a 213% increase in proceeds from USD2.89 billion in 1H 2020. Listings from consumer and technology, media and telecommunications businesses contributed to the jump in proceeds raised in 1H 2021. About one-fifth of the total number of IPOs came from financial services and education institutions.

Looking ahead, many new economy companies plan for mega, dual primary, secondary and spin-off listings. This suggests that the IPO market of Hong Kong is well positioned to meet a forecast of raising more than HKD200 billion during 2H 2021. National POG predicts Hong Kong to have about 120-130 IPOs raising more than HKD400 billion during 2021. These listing candidates include technology-based corporate WVR issuers, retail store network, artificial intelligence and innovative solution providers, and smart healthcare and pharmaceutical platforms.

"We are positive about the reform efforts the Hong Kong Stock Exchange put together in the last few years. The results of the new listing regime effective April 2018 are significant and have helped diversify the portfolio and investment products of Hong Kong's capital market. We look forward to seeing how issuers reap the benefits of the corporate WVR beneficiary regime and the potential measures for dual primary listings and secondary listings that may be implemented within this year. These aggregate efforts can enable Hong Kong to further outshine its peers in the years to come," adds Kay.

The Mainland market is anticipated to show a more balanced performance among the four markets by end of 2021. Most of new listings would come from the SSE STAR Market and ChiNext on the back of stable IPO issuance on the SSE STAR Market and a registration-based regime for ChiNext. Small and medium-sized manufacturing and technology businesses, however, will lead the number of IPOs from an industry perspective. The SSE STAR Market is forecast to have about 180-210 IPOs raising about RMB130 billion-RMB170 billion; whilst 180-210 companies could go public on ChiNext, raising RMB110 billion-140 billion, whereas the Main Boards in Shanghai and Shenzhen are likely to have about 150-180 new listings raising RMB160-200 billion.

"Chinese companies have long been wishing to go public in their home market regardless of developments in the overseas markets. The intensive, deepening reforms that the regulators have put together for the capital market are expected to pay off with more significant benefits in 2021," concludes Kay.

Notes to editors:

Unless specified otherwise, all statistics are updated with our estimates and analysis as at 30 June 2021.   

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

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

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