A-share market shows resilience amid uncertainties

While initial public offering activity was lackluster globally in 2022 due to geopolitical tensions and multiple market uncertainties hindering economic growth, the IPO market remained buoyant in the A-share market last year as the country's technology-focused boards have started to show more vitality.

As calculated by leading consulting firm KPMG, the number of IPO cases and total funding raised globally plunged 50 percent and 60 percent, respectively, year-on-year in 2022. IPO financing realized on the two major bourses in the United States, the New York Stock Exchange and Nasdaq, plummeted more than 90 percent yearly.

But the A-share market demonstrated its resilience amid global gloom. Although the number of IPO cases contracted 15 percent year-on-year to 416 in 2022, total financing increased 9 percent to 584.9 billion yuan ($87.03 billion), refreshing the record reached in 2021, according to professional services provider EY. 

Deepened capital market reforms, promotion of the registration-based IPO mechanism and the establishment of a multilayered capital market had contributed to the record-high proceeds in the A-share market in 2022 when the world economy was confronted with various challenges, said Zhao Haizhou, the eastern region A-share offering leader for the capital market services group at Deloitte. 

It should be noted that IPO proceeds made at the STAR Market on the Shanghai Stock Exchange — the board aiming to nurture "hard technology" companies, such as chipmakers, biopharmaceutical companies and artificial technology firms, accounted for 40 percent of the whole-year IPO fundraising in the A-share market in 2022, according to EY's calculation. It is the first time for the STAR Market to overtake the A-share main board where large-caps are listed in terms of IPO financing.

On top of that, among the 10 largest IPOs recorded on the A-share market last year, measured by proceeds, seven are listed on the STAR Market.

Meanwhile, the number of IPO cases recorded on the ChiNext in Shenzhen, Guangdong province — the board to boost integration between traditional industries and new technologies and novel business models — came in at 150 by the end of 2022, according to latest data from market tracker Wind Info, overtaking all the other boards in the A-share market.

As understood by Felix Fei, EY Assurance partner, the development of "hard technology", which has become a major national strategy in China, has nurtured structural changes in the A-share market in recent years. While financial service providers used to top the list of IPO proceeds, their leading position has been dislodged by technology, media, telecom, biopharmaceutical companies and healthcare firms. Industrial companies with core technologies have also caught up in terms of IPO financing. 

Advanced manufacturing, which is expected to highlight China's economic growth in 2023, will see more IPOs successfully announced this year, said Fei. Companies that use special and sophisticated technologies to produce novel and unique products, which are also in line with the country's strategic development path, will also drive IPO activity on the one-year-old Beijing Stock Exchange, which was launched to nurture technologically advanced small and medium-sized enterprises.

While the BSE saw 75 new companies achieve successful flotation in 2022, with the total financing coming in at 14.9 billion yuan, Deloitte estimates that up to 120 companies will announce their IPOs on the BSE in 2023, with the total proceeds reaching 24 billion yuan.

The STAR Market in Shanghai is expected to see 120 to 140 new listings in 2023, with total fundraising estimated between 305 billion yuan and 340 billion yuan. The ChiNext is likely to accommodate 150 to 170 IPOs in 2023, with proceeds estimated to top 210 billion yuan, according to Deloitte.