First-quarter IPOs confirm vibrant market sentiment

Shanghai, Shenzhen, HK sizzle, while some undaunted companies head for US

Despite the lingering COVID-19 pandemic and supervision complexity in some parts of the world, first-quarter initial public offerings raised substantial amount of funds from major stock markets, including those in Shanghai, Shenzhen and Hong Kong, suggesting investor sentiment remains vibrant.

There were 100 IPOs on China's A-share market in the first three months, up 96 percent year-on-year, which raised 76.1 billion yuan ($11.6 billion), down 3 percent year-on-year.

Among them, 57 companies issued new shares on the Shanghai Stock Exchange and raised 52.4 billion yuan, while the Shenzhen bourse saw 43 IPOs that netted 23.7 billion yuan.

Dick Kay, leader of Deloitte China National Public Offering Group, said the benefits of the pilot registration-based IPO mechanism are increasingly noticeable at the technology-heavy ChiNext of the Shenzhen bourse.

Its counterpart in Shanghai, the STAR Market, where the new IPO mechanism was first experimented in July 2019, has been showing stable performance.

The IPO pace on the two technology-focused boards has picked up momentum in the first quarter, but the fundraising scale contracted moderately to avoid overheating of the market, said Kay.

But the two boards will be the major driving force of the A-share market this year, said Deloitte experts.

The STAR Market is expected to receive 150 to 180 IPOs this year, with the total financing expected to be between 250 billion yuan and 300 billion yuan.

Another 140 to 170 companies will go public on the ChiNext, with an estimated maximum financing of 170 billion yuan.

Small and medium-sized manufacturing and technology companies will make up the most of the newly listed companies.

In fact, a record amount was raised via the IPOs on the Hong Kong bourse during the January-March period.

In all, 32 companies made their debut on the Hong Kong stock exchange as of March 31. Although the number is down by 14 percent year-on-year, the amount raised spiked by whopping 842 percent year-on-year to a historic high of HK$132.8 billion ($17.1 billion).

Up to 70 percent of it came from three gigantic IPOs with weighted voting right structures. Two of them were secondary listings of technology company Baidu Inc and videosharing site Bilibili.

Edward Au, southern region managing partner of Deloitte China, said that the heat in the Hong Kong IPO market can be attributed to the new economy companies, which accounted for 90 percent of the funds raised.

The increasing number of US-listed Chinese mainland companies seeking secondary listing in the city has reconfirmed Hong Kong's appeal and ability to attract capital from across the world, a fact well recognized by companies and investment funds alike, he said.

As Deloitte estimates, Hong Kong will record 120 to 130 IPOs this year, with the total estimated financing topping HK$400 billion. This forecast is backed by the expected capital inflow on the back of loose monetary policies worldwide and the anticipated return of more US-listed Chinese mainland companies to home bourses.

The US government's increasingly stringent oversight over foreign company listings has not daunted Chinese companies. As the outlook for US economic recovery improves, more Chinese cloud-computing and technology service companies have chosen to go public in the United States, said Deloitte.

During the first quarter, up to 20 Chinese companies made their IPOs in the US, up 233 percent year-on-year, raising $4.37 billion, up a mind-blowing 1,081 percent year-on-year.