PwC report predicts home floats of US-listed companies

Chinese mainland innovative technology companies that are listed in the United States will likely move back to Hong Kong or Chinese mainland capital markets in the second half of 2022, fueled by several factors like domestic policy incentives and to avoid potential geopolitical uncertainties, according to a new report from global consultancy PwC.

With a package of supportive measures to stimulate economic growth and the improvement of a registration-based IPO system, the domestic capital market is expected to continue to grow and become a highlight across the globe despite current economic headwinds, said Wilson Chow, a PwC Global TMT industry leader.

"In the first half, some US-listed Chinese mainland companies have sought a secondary listing on the Hong Kong stock exchange," Chow said. He also noted that the Chinese mainland and Hong Kong bourses will become the preferred options for technology, media and telecommunications enterprises from the Chinese mainland seeking a primary listing.

There were 68 IPOs by Chinese mainland TMT enterprises in the first half, a slight decline from the 74 recorded during the second half of 2021, the report said. The total amount of financing for the 68 listings reached about 160.4 billion yuan ($23.6 billion).

The largest IPO was made by China Mobile, the world's largest telecom operator by mobile subscribers, which raised approximately 52 billion yuan on the main board.

Driven by the Shanghai Stock Exchange's STAR Market and the Shenzhen bourse's ChiNext board, Chinese mainland TMT enterprises remained relatively active in the capital market in the first six months of 2022, said Walter Zhang, assurance markets leader for PwC North China.

In the first half, 30 Chinese mainland TMT enterprises, representing 44 percent of the overall number, chose to list on the STAR Market. They raised about 70.9 billion yuan, accounting for 44 percent of total financing.

There were 19 TMT industry IPOs on ChiNext in Shenzhen that recorded financing of almost 27.8 billion yuan, accounting for 17 percent of total financing.

Another six Chinese mainland TMT enterprises chose to list on the Beijing Stock Exchange, which received about 1.1 billion yuan, accounting for 1 percent of total financing. Additionally, nine Chinese mainland TMT enterprises, or 13 percent of the total number of IPO-bound enterprises, opted to list in Hong Kong and overseas, and these listings netted 4.7 billion yuan, or 3 percent of the total proceeds.

Chen Duan, director of the Digital Economy Integration Innovation Development Center at the Central University of Finance and Economics, said regulatory uncertainty is one of the major issues confronting US-listed Chinese mainland companies, and some companies that are listed or planning to go public in the US may opt for Hong Kong or the Chinese mainland capital markets to avoid potential geopolitical risks.

Tech heavyweight Alibaba Group Holding Ltd, which already has a secondary listing in Hong Kong, said in July that it would apply for a primary listing in Hong Kong.

Pan Helin, co-director of the Digital Economy and Financial Innovation Research Center at Zhejiang University's International Business School, said currently nine Chinese mainland companies have achieved dual-listing on the US and Hong Kong bourses, which will increase the convenience for Chinese mainland investors to invest directly in these companies' shares via the stock connect mechanism linking the Shanghai, Shenzhen and Hong Kong bourses.