EY Global IPO Trends
Greater China is back
With the reopening of mainland Chinese exchanges and a strong start to the year in Hong Kong marked by a number of mega-deals, the region led the way in terms of global IPO activity in 2014 Q1. Solid investor confidence and appetite for new listings looks set to continue to bring a continued wave of companies to the public markets over the coming months.
- Greater China accounted for 27% of global deal numbers and 24% of capital raised globally in 2014 Q1.
- Hong Kong’s Main Market saw 15 IPOs raising US$5.0b in 2014 Q1, a 67% increase in deal numbers and 373% increase in capital raised compared with 2013 Q1.
- Mainland Chinese exchanges US$5.3b via 44 IPOs – there was no activity in the same period last year to suspension of new listings.
Floodgates open in China
Chinese exchanges saw a flood of IPOs in 2014 Q1. Thus far, post-IPO performance has been strong. All of the 48 new listings posted first-day gains, and as of 18 March, none were trading below the offer price. Industrials, technology and consumer staples were the most active industries in 2014 Q1. China's largest IPO since November 2012 when listing activity was suspended, Shaanxi Coal Industry Co. raised US$657m on the Shanghai Stock Exchange.
Hong Kong holding its own
Strong momentum from 2013 Q4 propelled activity in 2014 Q1, including one mega deal that saw capital raised exceeding US$1b (out of 6 deals globally). This is the US$3.1b listing of HK Electric Investments, the world’s biggest IPO so far this year, which contributed 63% of the total capital raised on the Hong Kong Main Market. This ranked energy as the top industry by capital raised, although real estate, retail and consumer staples remains the most active industry by number of deals. All of the 15 IPOs in 2014 Q1 were priced in the upper range. As of 18 March, 6 of the 13 newly listed companies were trading at or above the offer price.
Positive outlook for China
This year is expected to be a period of transition and learning as the new IPO regulations bed in. However, with 691 Chinese companies in the pipeline waiting to go public and no signs of investor appetite for new listings diminishing, the stage is set for continued high numbers of IPOs this year. The Chinese government is expected to issue further regulations to strengthen the IPO process and protect individual investors’ interests, boding well for the length term health of the A-share market and future IPO activity.
Possible slowdown in Hong Kong for second half of 2014
With a strong IPO pipeline including a number of further mega deals, listings activity should remain steady on the Hong Kong Stock Exchange in 2014 Q2. Looking to the second half of the year, the IPO market outlook is positive, but there is some uncertainty.
Activity could slow if investors’ appetite for risk is impacted by market volatility resulting from US tapering and lower-than -expected resultsfrom China’s manufacturing sector.