Shanghai and Hong Kong to take 1st and 3rd positions in global IPO ranking
Boosted by deepened capital market reform, the performance of bourses in Shanghai, Shenzhen and Hong Kong remained strong amid the pandemic, geopolitical tensions and a weakening macroeconomic climate
Published: 23 September 2020
The National Public Offering Group (POG) of Deloitte China today released its latest analysis of the initial public offering markets in the Chinese Mainland and Hong Kong for the first three quarters of 2020, and its forecast for their performance over the rest of this year.
Statistics indicate that the stock exchanges in Shanghai, Hong Kong and Shenzhen will claim first, third and fifth positions in the global IPO ranking by total funds raised in the first nine months of 2020, following the completion of many prominent flotations, including those of HK-listed companies on the SSE STAR Market and US-listed Chinese companies in Hong Kong, and the launch of ChiNext's registration-based regime.
Although hit by the pandemic, the deepening reform of the Chinese capital market and intensified geopolitical tensions channeled deal flow into the Chinese Mainland and Hong Kong. At the same time, market sentiment towards China's economic development remained positive, given its swift pace of controlling COVID-19. This provided abundant liquidity for the completion of many mega new listings.
The market is looking forward to massive A- and H-share flotations by a Chinese fintech group in Shanghai and Hong Kong next month. Several other developments are set to sustain the prevailing trend of listings in the Chinese Mainland and Hong Kong over the rest of this year, and in the near to medium term. These include the new limited partnership fund regime, the approval of Hong Kong-Mainland ETF cross-listing, Greater Bay Area Wealth Management Connect, the pending conclusion of the corporate weighted-voting rights (WVR) beneficiaries consultation, launch of the Hang Seng Tech Index, inclusion of WVR and secondary listed companies in the Hang Seng Index and Hang Seng Chinese Enterprises Index, a proposed paperless listing and subscription regime, and the new registration-based regime on Shenzhen’s ChiNext.
The National Public Offering Group expects Hong Kong to have recorded 99 new listings raising HKD213.8 billion by 30 September 2020, versus 98 IPOs raising HKD127.8 billion in the same period of 2019. This represents a 1% rise in the number of IPOs and a 67% surge in proceeds raised. Eight mega IPOs, including four secondary listings, have contributed more than three-fifths of total funds raised so far this year.
"The new secondary listing regime came at a good time to assist US-listed Chinese new economy companies to diversify their fundraising routes into a global market in an Asian time zone amid geopolitical tension. These new listings, which were well received and raised a large pool of funds, are a demonstration of Hong Kong's capability in drawing liquidity despite a challenging market environment. Other recent market developments have together been strong pull factors for Hong Kong listings by new economy companies and other issuers," says Edward Au, managing partner, Southern region, Deloitte China.
The National POG expects there to have been 293 IPOs raising RMB355 billion in the Chinese Mainland by end-September 2020, representing increases of 131% in the number of new listings and 153% in proceeds raised, versus 127 new listings raising RMB140.1 billion in the first three quarters of 2019. The Shanghai bourse led with 179 IPOs raising RMB274.7 billion, largely due to the conclusion of two mega listings. Shenzhen contributed 114 new listings raising RMB80.3 billion.
"The Chinese Mainland capital market has undergone many important reforms in recent years. It has been challenging for a capital market to make so many significant changes, especially as it was hit badly by the pandemic in the first quarter of this year. However, we are pleased to have seen the remarkable results of this continuous reform within such a short period of time," adds Anthony Wu, A-share capital market leader of Deloitte China.
Amid the impact of Sino-US regulatory actions and developments in bilateral relations, slightly more Chinese companies have raised funds in the US recently, boosted by huge new listings by a property portal and two manufacturers of new energy vehicles in July and August. The market is expected to have seen 22 IPOs raising USD8.44 billion by the end of September 2020, versus 21 new listings raising USD2.90 billion in the first nine months of 2019, representing increases of 5% in deal number and 191% in proceeds.
In the last quarter of 2020, Hong Kong is expected to see another two or three secondary listings, on top of two or three mega listings that could raise up to HKD7.8 billion each. In addition to the Chinese fintech group, these mega listings could include a healthcare company and a consumer brand. Adding in its results over the first nine months, Hong Kong is expected to close 2020 having seen 140 new listings raising nearly HKD400 billion.
"Whether Hong Kong's fundraising level in 2020 can surpass 2010, a record year, depends on how the Chinese fintech group will be offered, valued and priced in Hong Kong and Shanghai. Nevertheless, this year's result will be outstanding, and important for Hong Kong's success as an international financial center and fundraising hub in the Greater Bay Area. We are encouraged to see more regulatory changes and developments, including the new limited partnership fund regime and Hang Seng Tech Index, which will help form a stronger ecosystem and spur the listings of new economy companies in the years to come," adds Dick Kay, leader, National Public Offering Group of Deloitte China.
The SSE STAR Market is expected to have seen 140-170 new listings raising RMB320 billion, or could even exceed RMB400 billion, by the end of the year, followed by ChiNext with 120-150 IPOs raising RMB100-130 billion. The Main Board and SME Board are expected to have seen 120-150 IPOs raising RMB130-160 billion.
"We expect more new listings on the SSE STAR Market and Shenzhen's ChiNext following the launch of registration-based regime reform. The Chinese Mainland market is therefore likely to raise more funds than it did in 2010, which was a record high. With the results Shanghai Stock Exchange has attained so far, we anticipate it will cement first place with the listing of the Chinese fintech group, which is expected to be the world's biggest IPO of 2020. These are all very encouraging achievements driven by the reforms implemented over several years," concludes Wu.
Notes to editors:
Unless specified otherwise, all statistics are updated with our estimates and analysis as at 30 September 2020, which assume the Chinese fintech group's offering is split equally between Shanghai and Hong Kong.
Sources for HK 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, Deloitte estimates and analysis.
Sources for US IPO (Chinese companies) statistics: New York Stock Exchange, Nasdaq, Bloomberg and Deloitte estimates and analysis.