ChiNext in Shenzhen to record most listings; STAR Market in Shanghai boasts largest funds

The ongoing deepened reforms in the Chinese capital market have borne fruit, with vibrant initial public offerings as solid proof, a report released by services provider Deloitte said on Monday.

Chinese mainland bourses are set to record 491 IPOs by the end of this year, with the expected proceeds to exceed 536.7 billion yuan ($84.2 billion). This translates into a 25 percent increase in the number of IPO deals and 14 percent growth in proceeds raised when compared with 2020 data, said Deloitte.

The newly launched Beijing Stock Exchange will record 11 new listings by the end of this year, with total proceeds reaching 1.75 billion yuan.

ChiNext, on the Shenzhen Stock Exchange, will record the most IPOs this year with the number expected to touch 199 by year's end, while 162 IPOs will be floated on the STAR Market on the Shanghai Stock Exchange.

Measured by the size of IPO proceeds, the STAR Market will have raised the largest amount at 202.9 billion yuan, followed by the 162.3 billion yuan raised on the main board of the Shanghai bourse.

The Shanghai exchange will have raised 365.2 billion yuan from 248 IPOs when the year wraps up while the Shenzhen bourse is set to have 232 new listings with total proceeds coming in at 169.7 billion yuan.

The vibrancy of IPO listings seen on ChiNext and the STAR Market in 2021 reflects the positive results of registration-based IPO reform, said Tong Chuanjiang, A-share offering leader for the capital market services group at Deloitte China.

Looking ahead to 2022, continued dynamism in IPOs will be seen in the A-share market, especially on the ChiNext, STAR Market and the Beijing Stock Exchange. Small and medium-sized manufacturing and technology counters will make up the most IPOs, Deloitte said.

The STAR Market is projected to have 170 to 200 new listings in 2022, and raise up to 250 billion yuan. There could be another 210 to 240 IPOs on the ChiNext, with total proceeds expected to top 180 billion yuan. The main boards in Shanghai and Shenzhen are forecast to have about 120 to 150 IPOs, generating up to 230 billion yuan next year, according to Deloitte.

Tong said the registration-based IPO mechanism is expected to be extensively adopted at the A-share market in the near future, which, together with the deepening reforms in the Chinese capital market, support Deloitte's positive outlook on IPOs in the Chinese mainland market.

"The multilevel capital market and its interconnectivity will further facilitate companies from different industries, of different sizes and at different development stages to garner more capital, which will in turn help China to attain its goal of sustainable economic growth and reach its carbon neutrality goals," he added.

Given the ongoing geopolitical issues, regulatory changes affecting the new economy and education sector in the Chinese mainland, along with speculation about interest rate hikes and reduced bond purchases, the pace of IPOs slowed down in Hong Kong in the second and fourth quarters, Deloitte said.

Hong Kong is expected to host 97 IPOs in 2021, down 34 percent year-on-year. The proceeds will accordingly contract by 17 percent from a year earlier to reach HK$331.4 billion ($42.5 billion), according to Deloitte.

However, the return of US-listed Chinese mainland companies to the Hong Kong stock market will be a highlight next year. More technology companies, especially those involved in Asia's merger and acquisition boom, will be drawn to make special-purpose-acquisition-company listings in Hong Kong, said Edward Au, southern region managing partner at Deloitte China.

In terms of IPO funds raised, Nasdaq and the New York Stock Exchange will take the first two spots globally, followed by the Shanghai Stock Exchange.

Although the US IPO market has been held back for Chinese companies due to the implementation of regulations such as the Holding Foreign Companies Accountable Act, 42 Chinese companies will have raised $15.03 billion in their US stock market debuts this year, while 35 Chinese companies raised $13.77 billion in their US IPOs in 2020.