Deloitte China Capital Market Services Group released its outlook for the Chinese mainland and Hong Kong IPO markets

On 21 June, Deloitte China Capital Market Services Group released a mid-2024 review of the Chinese mainland and Hong Kong IPO markets, as well as the outlook for the two markets in the second half of 2024.

According to the data, as of June 30, 2024, after the completion of 4 of the world's top 10 new listings, the New York Stock Exchange will take the first place in the global IPO financing location, followed by the NASDAQ will complete two of the world's top 10 new listings. The National Stock Exchange of India will be ranked third due to the large number of new listings. With the completion of the listing of one of the world's largest IPOs on a Spanish fashion and perfume company, the Madrid Stock Exchange will jump to fourth place. The Shanghai Stock Exchange (SSE) will be ranked fifth, while the Hong Kong Stock Exchange and the Shenzhen Stock Exchange (SZSE) will be ranked ninth and 10th respectively.

The "Nine Measures" announced by the State Council in April to enhance the high-quality development of the A-share market, as well as other related measures, will continue to closely supervise A-share listing applicants and new listings in the first half of 2024, resulting in a slowdown in Chinese mainland IPO issuance in the first half of 2024. This trend will affect the scale of new shares issued in 2024, and with the implementation of the new "National Nine Measures" and the "1+N" series of policy documents in the capital market, the market will have a positive impact, and A-share IPOs will achieve the desired results under the promotion of a series of policies.

After the Hang Seng Index rebounded in mid-April, Hong Kong's market liquidity and valuations improved slightly in the first half of 2024. However, it is believed that funding from the US, Europe and the Middle East is still outbound, so liquidity and valuations have not been able to facilitate large or mega IPOs. While the continued recovery of the mainland economy will be key, the long-awaited US interest rate cut in June will be the most important factor in determining the extent to which Hong Kong's IPO market will rebound and whether more major IPOs will be listed during the year. At the same time, due to the promulgation of the "National Nine Measures" by the State Council and the announcement by the China Securities Regulatory Commission to support the listing of leading mainland enterprises in Hong Kong, more A-share listing applicants will transfer their listing plans to Hong Kong.

In the first half of 2024, Chinese mainland is expected to record a total of 44 IPOs raising RMB32.5 billion, compared to 173 IPOs raising RMB208.7 billion in the first half of 2023. This represents a 75% drop in the number of new listings and an 84% decrease in the amount raised. Compared to the first half of 2023, the number of new listings and the amount raised in all five mainland market sectors decreased. The Growth Enterprise Market (GEM) will have the largest number of IPOs, while the Shanghai Main Board will raise the highest amount of IPOs. The Shanghai Stock Exchange is forecast to raise 18.9 billion yuan from 15 new listings, followed by 19 new listings on the Shenzhen Stock Exchange to raise 11.6 billion yuan, while the Beijing Stock Exchange can only raise 2 billion yuan from 10 new listings.

Deloitte China Capital Market Services Group Listing Leader Kee Wenhe said, "The overall slowdown in the issuance of new shares in the A-share market should be temporary. We look forward to the fact that investors will be able to choose more high-quality listing applicants and issuers, which will bring better investment returns and make a richer contribution to the economy. In the first half of 2024, the Shanghai Stock Exchange maintained its fifth place in the global IPO rankings, and we expect the two major mainland stock exchanges to once again soar in the global IPO rankings as they have done in the past few years. ”

It is predicted that there will be about 30 new listings in the Hong Kong IPO market in the first half of 2024 raising HK$13.1 billion, implying a 3% decrease in the number of new listings and a 27% decrease in the amount raised compared to the 31 new listings in the first half of 2023 raising HK$17.9 billion.

"While there will not be any mega or mega IPOs in Hong Kong in the first half of 2024, we are very excited to see the first Specialist Technology Company and the first GEM IPO after the recent reforms. After years of reform, both are important breakthroughs in Hong Kong's capital market. The former will diversify the market, while the latter will help launch the GEM. In the past three years, GEM has not recorded any new listings. Due to the positive market response to these two IPOs, we expect more Specialist Technology Companies and SMEs to list in 2024. ”

Taking into account the continued tightening of the Mainland's supervision of issuers and listing applications, as well as the positive impact of the implementation of various policy measures, CMSD maintains its full-year forecast for the A-share IPO market, i.e., a total of 115 to 155 IPOs raising between RMB1,390 billion and RMB166 billion. There will be 25 to 35 new listings on the Shanghai and Shenzhen Main Boards raising RMB74 billion to RMB84 billion, followed by 35 to 45 IPOs raising RMB300 billion to RMB37 billion, 20 to 25 new listings on the Shanghai STAR Market raising RMB28 billion to RMB35 billion, and another 35 to 50 IPOs raising RMB70 billion to RMB10 billion on the Beijing Stock Exchange.

Zhao Haizhou, Deloitte China Capital Market Services Group Eastern Region A-share Managing Partner, said, "In the first half of 2024, the pace of A-share new issuance has slowed down. However, the resumption of the issuance review meeting in mid-May is a positive development and sends a signal of confidence to the market. We believe that with the implementation of the new 'Nine Measures' and the '1+N' series of policy documents for the capital market, it will have a positive impact on the development of the A-share market for the rest of 2024 and promote the long-term development of the A-share market with higher quality." ”

However, CMS has revised its full-year forecast for Hong Kong's IPO market to 80 IPOs raising between HK$600 billion and HK$80 billion.

Deloitte China Audit & Assurance Partner Jie Bao added, "We expect China's economy to perform stronger in the second half of the year, driven by government measures to stimulate growth and stabilize the market, which will help boost investment confidence and attract more IPOs. The Fed's interest rate cuts, which are expected to take place in the third or fourth quarter, will allow more funds from the US, Europe and the Middle East to repatriate to Hong Kong, further enhancing market liquidity and valuations, and facilitating more new listings. The current list of active listings includes more than 100 IPO applications, M&A deals of specialist technology companies and special purpose acquisition companies, mega offerings delayed in 2023, well-known Mainland companies encouraged by Mainland regulators to list in Hong Kong, and GEM listing applicants that will drive the development of Hong Kong's IPO market in the second half of 2024. The change of listing plans of A-share listing applicants to Hong Kong and the return of China concept stocks will also be other key drivers. IPO applicants from the consumer, artificial intelligence, hard tech, life sciences and green and sustainable sectors will be in focus. In addition, some Mainland regulators have encouraged well-known Mainland companies to list in Hong Kong for primary listings on the A-share market. We expect that when the liquidity and market in the Hong Kong market improves, the listing conditions for these companies will be more favourable, which will have a more positive impact on the Hong Kong IPO market. “

As the mainland economy continued to improve in the first half of 2024, A-share IPOs were tightened and more Chinese companies listed in the US, raising a total of US$677 million from 23 IPOs, up from US$626 million raised from 20 IPOs in the first half of 2023.

"In the first half of 2024, more Chinese companies will file their plans to issue in the United States with mainland regulators and receive filing notices," Bao said. This figure is more than 1.5 times higher than the level of the whole year of 2023, showing the attractiveness and importance of the U.S. capital market for the development of Chinese companies. Most of these offerings will be small-scale. We expect more Chinese companies to go public in the U.S. ahead of the U.S. presidential election on November 5. ”