2019 Review and 2020 Outlook for Chinese Mainland and HK IPO Markets

Deloitte China's National Public Offering Group presents its latest analysis of the initial public offering (IPO) markets in the Chinese Mainland and Hong Kong in 2019 and 2020.

In 2019, IPO issuers, in particular those of prominent mega deals, continued with their listing plans despite lingering macro uncertainties, negative news flow and market volatility. Hong Kong's stock exchange is set to retain the global IPO fundraising crown, and Shanghai is expected to rise to 4th in the global ranking, by the end of 2019.

In marked contrast to the success of Hong Kong and Chinese Mainland markets, the US IPO market for Chinese companies dwindled this year. The global economic slowdown, ongoing Sino-US trade tensions and the new Shanghai Stock Exchange (SSE) Sci-Tech InnovAtion BoaRd (STAR) attributed to the downtrend.

Further development of the STAR Market, such as the inclusion of some of its constituents in Stock Connect schemes, eventual entry into international indices and potential launch of a new STAR component index; as well as the potential introduction of a registration-based regime on ChiNext, should further stimulate new economy companies' desire to list on Chinese Mainland markets in 2020.

The Main Board, SME Board and ChiNext are expected to have about 140-170 new listings raise approximately RMB180-220 billion in total. On the STAR Market, Deloitte expects about 120-150 IPOs to raise RMB130-160 billion.

Inspired by the mega secondary listing of a Chinese tech giant in November 2019, more well-known, US-listed Chinese technology and internet companies or those that previously planned to list in the US are expected to be attracted to Hong Kong in 2020. Reforms including the offering mechanism, proposals for a limited partnership regime for private equity funds, and expansion of the H-share full circulation program should help Hong Kong gain favor among issuers.

These developments suggest there could be more listings from top Chinese new economy companies, including those with weighted voting rights structures, biotech businesses and international companies. Some of these could raise at least HKD10 billion each. Deloitte therefore expects Hong Kong to have about 160 new listings that raise HKD220-250 billion in 2020.