- Global IPO volumes fell 46%, with proceeds down by 58% year-on-year
- Through 1H 2022, the amount of A-share IPO funds raised hit a record high, the Shenzhen Stock Exchange and Shanghai Stock Exchange ranked first in IPO volumes and proceeds
- Hong Kong IPOs expected to rebound in 2H 2022, attributed to the return of China concept stocks through dual-primary listing
EY today released the Mainland China and Hong Kong IPO Markets report, reviewing the global and Greater China IPO activity in the first half of 2022 and analysing the outlook for the second half of the year.
Economic uncertainty, coupled with geopolitical and pandemic factors, have continued to dragged IPO momentum to slow from Q1 into Q2, resulting in a considerable decline in both deal numbers and proceeds. Through 1H 2022, there were a total of 630 IPOs raising US$95.4b in proceeds, decreasing 46% and 58% respectively year-on-year. Mainland China and Hong Kong continued to be the key drivers for IPO activity. IPOs in mainland China and Hong Kong accounted for 30% and 53% of the world’s total by volumes and proceeds respectively.
The Shanghai Stock Exchange ranked first in the world with a fundraising amount of US$32.8b, accounting for 34% of the global total. The Shenzhen Stock Exchange led the world in the number of IPOs, with a total of 81, accounting for 13% of the global overall. The ten largest IPOs by proceeds raised US$40.0b. Three of them were Chinese companies, of which China Mobile Limited ranked second with a fundraising amount of US$8.157b.
Terence Ho, EY Greater China IPO Leader, says: “A convergence of factors including Covid-19 restrictions, geopolitical unrest, weakened stock market, economic uncertainty and rising interest rates, have weakened Hong Kong and mainland China’s IPO market in the first half of 2022. With the lifting of Covid-19 restrictions in Shanghai and Beijing, along with a series of positive economic developments and new government policies in China such as the State Council’s 33 stabilization policies and measures, China’s economy is expected to rebound significantly in the second half of 2022 and should result in a revival in IPO activity.”
A-share proceeds hit historic high, STAR outperforms in terms of proceeds
In 1H 2022, it is estimated that 169 companies were listed on A-share market, with a year-on-year decrease of 31%; and the funds raised amounted to RMB312b, with a year-on-year increase of 48%, hitting a record high. The oversubscription and mega IPOs have pushed up the proceeds.
With the full implementation of the registration-based IPO system and the further improvement of the regulatory system, the A-share market has drawn the capital influx of many high-quality sci-tech (science and technology) companies.
In 1H 2022, proceeds from the Shanghai Stock Exchange Science and Technology Innovation Board (STAR) exceeded those from the main board for the first time as deals from semiconductor, chip and other technology sectors lifted proceeds. The number of IPOs and the amount of funds raised accounted for 31% and 37% respectively. The ChiNext board of the Shenzhen Stock Exchange ranked top in terms of volumes as small- and medium-sized innovation-oriented companies in traditional industries dominated IPO activity on the A-share market.
Jane SJ Yang, EY1Managing Partner of Beijing Office, says: “We can still see opportunities and positive momentum amid short-term macroeconomic headwinds. Driven by the multiple measures taken by the regulatory authorities, a multi-level and market-oriented capital market is gradually being formed, and the trading of securities has been further opened, hence, it also improves the quality of listed companies continuously. The ESG (environmental, social and governance) rating of companies has gradually become an important investment index when the market is unceasingly promoting sustainable development together. As investors have become more selective and are focusing on profitable growth, companies going public are suggested to embed ESG as part of their core business values, to strengthen governance and disclosure of relevant information to attract investors and increase valuation.”
The technology, media and telecommunications (TMT) industries ranked first in both IPO volumes and proceeds. Compared with the same period last year, the number of deals and proceeds have increased by 13% and 26% respectively. The energy and power industries, including traditional energy and carbon-neutral green companies, entered the top five in terms of proceeds.
Hong Kong saw slowdown in IPO activity, biotech and health remains key sectors
A total of 20 companies are expected to be listed in the Hong Kong market, raising a total of HK$17.7b in 1H 2022. Compared with the same period last year, the number of IPOs decreased by 56%, while the proceeds decreased by 92%. Biotechnology and health, and technology stocks are still the main IPO industries in the Hong Kong market. TMT ranked first in terms of proceeds, but the proportion of fundraising fell to 28%. The listing of Chinese companies in the US was sluggish due to policy regulations and other unfavorable factors. A total of four Chinese companies went public for the first time in 1H 2022, raising a total of US$95.5m.
King Li, EY1Assurance Partner, EY China North Head of Startup Sector, says: “Hong Kong’s IPO activity has been challenged by uncertainties in the global situation and the recurrent outbreaks of Covid-19 have significantly impacted the business happenings in mainland China and Hong Kong. Amid an improving Covid-19 situation, and the return of Chinese concept stocks, Hong Kong market sentiment is likely to receive a boost and resume its listing vitality. Both the Chinese and US regulatory authorities have recently signaled friendly intentions. Major disagreements are likely to be resolved. Companies planning to go public in US are recommended to get prepared and pay attention to the latest cross-border audit policies.”
Two companies have successfully listed in Hong Kong since the official launch of SPAC listing, with 11 companies in the pipeline. SPACs in Hong Kong mainly focus on the Asian region, especially the Greater China market, and industries such as new economy, green environmental protection, and new consumption.
As the Hong Kong Stock Exchange (HKEX) revised the IPO regulations to relax ‘dual primary listing’, dual primary listing has gradually become a trend among the Chinese concept stocks returning to Hong Kong. In the first half of 2022, two out of the three Chinese concept stocks returning to Hong Kong were listed by way of introduction.
Favorable policies revitalize IPO trend
Although the economic uncertainty and market volatility remain, a series of positive factors are expected to rejuvenate the subdued IPO activity. With the recovery of the domestic economy and the China Securities Regulatory Commission (CSRC) introducing policies to extend capital market support for Covid-hit industries, companies may have greater aspirations to go public in the second half of the year.
The registration-based IPO system is expected to be fully implemented within this year. The marketization of new stock issuance, and the fall on debut may become normalized, the strict implementation of delisting requirement as well as the diversification of delisting channels, will further promote the formation of a benign market ecology. A-share IPOs are expected to speed up in 2H 2022.
TMT, industrial and materials are the main industries in the pipeline. The expansion of the scope of application of the fifth set of listing standards for the STAR Market will benefit medical device companies going public.
Terence Ho says: “Being the gateway of Chinese mainland and the rest of the world, Hong Kong is the international financial center to complement and synergize the development of the mainland market. This year marks the 25th anniversary of the establishment of the Hong Kong Special Administration Region (HKSAR), and mainland China’s steady growth policy will help to boost the Hong Kong stock market. It is expected that the Hong Kong IPO market will recover steadily in the second half of the year. TMT, retail and consumer goods, biotech, health and materials, are still the leading sectors in terms of the number of deals coming to the market.”
1Ernst & Young Hua Ming LLP
Notes to Editors
About EY Initial Public Offering Services
Going public is a transformative milestone in an organization’s journey. As the industry-leading advisor in initial public offering (IPO) services, EY teams advise ambitious organizations around the world and helps equip them for IPO success. EY teams serve as trusted business advisors guiding companies from start to completion, strategically positioning businesses to achieve their goals over short windows of opportunity and preparing companies for their next chapter in the public eye. ey.com/en_cn/ipo
About the data
The data presented here is available on ey.com/en_cn/ipo/trends. Q2 2022 (i.e., January–June) is based on completed IPOs from 1 January 2022 to 21 June and expected IPOs by the end of June 2022. Data as of close of business 21 June UK time. All data contained in this document is sourced from Dealogic, CB Insights, Crunchbase, SPAC Insider and EY unless otherwise noted. Special purpose acquisition company (SPAC) IPOs are excluded in all data included in this report, except where indicated.
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