2022 Review and 2023 Outlook for Chinese Mainland & HK IPO markets

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

The report 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. Hong Kong Stock Exchange and Frankfurt Stock Exchange are set for 4th and 5th place.

In 2022, 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.

CMSG expects that IPOs will grow steadily and proceeds may continue to rise in 2023, supported by the optimization of pandemic control measures on the Mainland and various economic measures on stabilizing the economic growth and progress.

• 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.

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. 

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.

CMSG expects 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.

Although more Chinese companies went public in the US in Q3, this momentum dissipated in Q4. The number of new shares and the amount raised in this market in 2022 were significantly lower than in 2021.

Following the earlier inspection of the audit papers of US-listed China concept stocks in Hong Kong, CMSG looks 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.