Mainland and Hong Kong IPO markets to have stronger performance in 2023

Published: 15 December 2022

Deloitte China's Capital Market Services Group (CMSG) today released its review of the Chinese Mainland and Hong Kong initial public offering (IPO) markets in 2022 and the outlook for 2023.

Its latest analysis indicates that stock exchanges in Shanghai, Shenzhen, and Korea will take up the first three positions in the global IPO ranking in 2022 based on funds raised by 31 December 2022. This is partly the result of three mega IPOs, with Shanghai hosting two of these mega listings and Korea hosting the other, which was the biggest IPO of 2022. With offerings that were relatively smaller in fundraising scale, Hong Kong Stock Exchange and Frankfurt Stock Exchange are set for 4th and 5th place.

The CMSG expects the Chinese Mainland market to have a brighter outlook, raising even more funds in 2023 after a record-year in 2022 that was supported by the normal pace of IPO issuance set by regulators. Hong Kong's IPO activity is also set to pick up, with more new listings and proceeds after a slow year in 2022 due to tighter market liquidity and lower valuations amid the Russia-Ukraine conflict, intensive US rate hikes and tapering, and a slowdown in the global capital market. Although the Russia-Ukraine conflict continues, both markets are set to benefit from the Chinese Mainland's optimization of pandemic controls and continued measures on stabilizing economic growth in 2023. A slowdown in US interest rate hikes, potential reopening of the Hong Kong and Mainland boundary, and regulatory reforms such as launch of RMB-denominated stock trading desks, listing regime for specialist technology companies, and FINI will stimulate the Hong Kong market further.

The CMSG forecasts that for the full year 2022, the A-share market will have recorded 413 IPOs raising RMB581.8 billion, versus the previous year's 492 new listings raising RMB537.2 billion. This would represent a 16% decrease in the number of deals but an 8% rise in IPO proceeds. Shanghai markets will have raised about RMB357.6 billion from 153 IPOs, followed by Shenzhen (RMB209.3 billion from 185 IPOs), and Beijing (RMB14.9 billion from 75 IPOs). Based on prevailing trends, the SSE STAR Market will have raised the most funds (RMB250.8 billion) and ChiNext will have led in new listings (146).

"Thanks to ongoing efforts to deepen capital market reform, such as introducing the registration-based regime to most markets and a multi-tier capital market, the Chinese Mainland will still have had a record-breaking year for IPO funds raised in 2022 despite economic challenges. The return listings of two mega red chips also helped contribute to this stellar result," says Dick Kay, Offering Services leader, Capital Market Services Group, Deloitte China. 

The Capital Market Services Group is positive about the outlook for the A-share IPO market in 2023 expecting it to raise more IPO funds, driven by the SSE STAR Market and ChiNext. Beijing Stock Exchange will also help drive the number of deals for the entire market during the year.

The SSE STAR Market should have 120 to 140 listings raising RMB305 billion to RMB340 billion in 2023. There could be 150 to 170 new listings on ChiNext raising about RMB185 billion to RMB210 billion. The main boards in Shanghai and Shenzhen are forecast to have about 60 to 80 IPOs raising RMB110 billion to RMB125 billion. Beijing Stock Exchange should have about 100 to 120 listings raising RMB20 billion to RMB24 billion.

"In 2023, IPOs will grow steadily and proceeds may continue to rise, supported by the optimization of pandemic control measures on the Mainland and various economic measures on stabilizing the economic growth and progress," adds Tong Chuan Jiang, A-Share Offering leader, Capital Market Services Group, Deloitte China.  

In Hong Kong, the CMSG estimates that the market will end 2022 having hosted about 82 new listings raising HKD102.0 billion, versus the previous year's 97 IPOs raising HKD331.4 billion. This would represent a 15% decline in deal volume and a 69% drop in deal value. Despite a pickup in the second half of 2022, the number of mega listings and funds raised fell back sharply year-on-year.

"Although Hong Kong showed weaker performance in 2022 amid the impact of geopolitical and macroeconomic developments, including the Ukraine-Russia conflict and US interest rate hikes, it still demonstrated its resilience by taking 4th place in IPO funds raised among global stock exchanges in 2022. Other developed markets, including the US, were less resilient," says Robert Lui, Southern Region Offering Services leader and Hong Kong Offering leader of the Capital Market Services Group, Deloitte China.

In 2023, the CMSG forecasts that Hong Kong will see 110 new listings raising approximately HKD230 billion, backed by various positive factors and developments including a slowdown in US interest rate hikes and anticipated reopening of the Hong Kong and Mainland boundary.

"Although China concept stocks will continue to list in Hong Kong, more Mainland companies are likely to list H shares in Hong Kong before or after their A shares float in the Mainland. As valuations pick up eventually, more spin-off listings are anticipated. Regulatory reforms such as the introduction of RMB-denominated stock trading desks, inclusion of HK-listed overseas companies into the Southbound of Stock Connect, and FINI will help support the debuts of dual-currency IPO, overseas companies and specialist technology companies during the year as well. This will underscore Hong Kong's position as the largest global offshore Renminbi business hub," says Edward Au, Southern Region managing partner, Deloitte China.

"We expect Hong Kong to have a slow start given it will take time for these new positive developments to develop and stimulate the economy and business activities. Hong Kong will gather momentum over time, and we believe the overall performance of the Hong Kong market will be positive in 2023 and Hong Kong will continue to be featured as a "super-connector" supporting the Chinese Mainland's connectivity with the rest of the world and vice versa," Au adds.

Although more Chinese companies went public in the US in Q3, this momentum dissipated in Q4. For the full year 2022, there will have been around 16 new listings raising USD540 million, representing a 62% drop from 42 listings in 2021 and a 96% decline from USD15.0 billion in funds raised.

"The US will remain an important market given its long historical and mature development and the receptiveness to innovative business models among US investors, especially those who focus on the technology sector. The market also offers more comparable examples of innovative companies. Following the earlier inspection of the audit papers of US-listed China concept stocks in Hong Kong, we look forward to seeing the market turn more active in 2023 on improved fundamentals as US interest rate hikes slow and China's economy regains its robustness," adds 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 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 the 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.}