- In 1H 2023, global IPO activity continued to slow down, with a 5% and 36% decrease year-over-year (YOY) by number of deals and proceeds respectively, while mainland China remained as a key IPO destination and comprised 28% and 50% by deals and proceeds of the world’s total respectively.
- In 1H 2023, the number of IPOs in the A-share market remained at a high level. With the full implementation of the registration-based IPO system, each board was better positioned, and the IPO ecosystem was further optimized.
- In 1H 2023, the Hong Kong market saw sluggish IPO activity and expects to pick up.
EY today released Mainland China and Hong Kong IPO report, which concluded the IPO activities in 1H 2023 around the world and Greater China, and highlighted the outlook in 2H 2023.
According to the report, due to the global economic uncertainties and geopolitical entanglement, global IPO activity saw a continued slowdown in 1H 2023. A total of 615 companies were listed and the proceeds raised amounted to US$60.9 billion, down 5% and 36% by deals and proceeds respectively compared with last year. Mainland China remained as a key IPO destination, where IPO deals and proceeds accounted for 28% and 50% of the world’s total respectively.
In terms of proceeds, Shanghai Stock Exchange and Shenzhen Stock Exchange from mainland China ranked top two among global bourses. Five of the top 10 IPOs were Chinese companies, which were from technology, energy and power and retail sectors.
The number of IPOs in the A-share market remained at a high level and the IPO ecosystem was optimized thanks to the full implementation of the registration-based IPO system
In 1H 2023, the A-share market saw 173 IPOs, with proceeds raised totaling RMB210.4 billion, up 2% by deals and down 33% by proceeds. Only one company raised funds worth over RMB10 billion with proceeds of RMB11.72 billion, comparatively less from the RMB90 billion by three mega IPOs in the same period last year. The decline in proceeds was mainly resulted from the lack of mega IPOs.
The report finds ChiNext and STAR continued to lead IPO activities, ranking top in deals and proceeds respectively. The Beijing Stock Exchange saw the fastest growth, with 41 companies floated, up 116% and 169% year-on-year (YOY) by deals and proceeds respectively. In 1H 2023, the percentage of Specialized, Refinement, Differential and Innovation (SRDI) companies1 IPOs continued to rise and hit a record high for the same period.
In 1H 2023, as the registration-based IPO system has been fully implemented, each board was better positioned and the quality requirements for listed companies were tightened. According to the report, in 1H 2023, the passing rate of IPO applications decreased YOY. Due to the higher threshold, STAR boasted the lowest passing rate and the number of terminations remained at a high level.
Jacky Lai, EY2 Hong Kong Assurance Partner, says: “The registration-based system has been fully implemented, and the relevant rules for processing were streamlined and improved. As such, the issuance and listing regime was continuously optimized, and the review efficiency was enhanced, providing clearer rules and higher requirements from industry and technology content dimensions. Therefore, a company seeking an IPO needs to make the right choice on which board they would like to apply to base on its specific conditions. Meanwhile, establishing a sustainable business with a strong foundation is integral to a successful IPO.”
In 1H 2023, as IPO pricing tended to be more rational, there was a decline in fall-on-debut stocks over the same period last year. Lai says: “With the deepened reform of the registration-based IPO system, full-on-debut has been more often since 2022. As there is growing uncertainty in first-day positive returns, investors are advised to focus more on the quality of companies seeking listing. Also, the registration-based IPO system highlights the importance of the growth potential and profitability.”
Hong Kong saw continued sluggish IPO activity and new rules expanded the listing regime
In 1H 2023, it is expected that a total of 29 companies will float on the Hong Kong market, and the proceeds raised will amount to HK$17.8 billion. The number of deals was up by 45% and 0.6% respectively over the last year, when IPO activity hit an all-time low due to the pandemic.
With the relaxation of pandemic prevention and control measures in the mainland, mainland Chinese companies increasingly dominated the Hong Kong IPO market. By sector, TMT along with biotech and health care both ranked top in terms of number of deals; retail led other sectors in terms of proceeds raised and accounted for 37% of the total proceeds raised.
In 1H 2023, HKEX rolled out the new listing regime for specialist technology companies, further expanding Hong Kong’s listing framework. Peter Chan, EY Hong Kong TMT Assurance Leader, says: “Compared with the consultation proposal, the requirements on minimum market capitalization and R&D expenditure ratio have been revised downward, providing a new financing channel for more companies with a shorter history, many of which are in the course of researching and developing products or services for commercialization.”
Besides, HKEX introduced higher environment, social and governance (ESG) management requirements for listed companies in 1H 2023, and disclosure requirements on climate-related information will be piloted in 2024. Lai says: “As ESG serves a key role in implementing high quality development strategy, it is suggested that prospective IPO applicants begin incorporating ESG management into their business strategies and set ESG targets to enhance their ability to navigate long-term risks.”
Commenting on the “HKD-RMB Dual Counter Model” launched by HKEX lately, Lai says: “The model will facilitate the use of the RMB in equity trading in Hong Kong and further support RMB internationalization. It will also boost equity trading in Hong Kong and bring about new opportunities.”
A-share market expects to remain the leader in global IPO activity and the Hong Kong market could see a pickup in 2H 2023
In 2H 2023, China's economy could see a steady growth, and more policies are expected to boost economy. Lai expects IPO activities will maintain at a high level in 2H 2023. Meanwhile, with the full implementation of the registration-based IPO system, the listing process and delisting regime will continue to be standardized and the rule of survival of the fittest is increasingly prominent in the capital market, and SRDI companies are set to dominate the IPO activity.
As for the trends in the Hong Kong market, Lai says: “Opportunities come with risks. The Hong Kong market will fluctuate due to growth uncertainties faced by global economy, especially the performance in the US market and relevant geopolitical environment. However, as the World Bank revised upward the economic growth forecast for the world and China, along with the introduction of favorable rules by HKEX facilitating Hong Kong’s status to remain a key IPO destination for companies from mainland China, IPO activities in Hong Kong are expected to see a pickup in 2H 2023.”
1 Source: Wind, referring to the listed enterprises in the latest list of SRDI “little giant” enterprises announced by Ministry of Industry and Information Technology or companies with shares or controlling shares in such companies
2 Ernst & Young
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About the data
The data presented in the press release are based on priced IPOs as of 19 June 2023 and expected IPOs by 30 June 2023. Sources of data include EY statistics, Wind, CSRC, Eastmoney, Hong Kong Stock Exchanges and Nasdaq.