IPO market expected to pick up in 2013: PwC

This year could see 200 listings raise up to 150b yuan on mainland

China's A-share market in 2013 is expected to see 200 new listings that could raise 130 billion yuan ($20.9 billion) to 150 billion yuan, fueled by an improved capital market and strengthening economy, according to international accounting firm PricewaterhouseCoopers.

The estimate compares to 155 IPOs last year, which raised total funds of 108.3 billion yuan, PwC said.

The Shanghai Stock Exchange attracted 26 IPOs in 2012, raising 38.3 billion yuan, down 33 percent and 64 percent respectively compared to the previous year.

The Shenzhen SME Board listed 55 IPOs last year, down 52 percent year-on-year, which raised 34.9 billion yuan, a fall of 66 percent, PwC figures showed.

ChiNext listed 74 IPOs, down 42 percent on 2011, with funds raised reaching 35.1 billion yuan, an increase of 56 percent.

Frank Lyn, PwC's China and Hong Kong managing partner, said four key sectors accounted for a large share of the IPOs: industrial products, information technology, financial services, as well as retail and consumer.

According to the PwC figures, there are now about 830 enterprises waiting to list on the Shanghai and Shenzhen stock markets.

"These enterprises point toward an active IPO market in 2013, but their fund-raising plans are subject to economic and political trends and market confidence," Lyn added.

Most economists expect China's GDP growth this year to be higher than in 2012 due to government stimulus measures, increasing the likelihood of a growth in companies coming to the market.

Qu Hongbin, HSBC's chief economist in China, for instance, said in a recent research note that he is expecting GDP growth of around 8.6 percent in 2013.

Accounting giant Ernst & Young has suggested similar levels, forecasting that the capital raised through IPOs on the Shanghai and Shenzhen stock exchanges will increase by up to 30 percent this year, after falling to a three-year low in 2012.

According to the latest Grant Thornton International Business survey, Chinese business optimism has risen for 2013, after bottoming out in the fourth quarter of 2012.

Although still at a lower level compared with the first half of 2012, its optimism index rose to 19 percent in the fourth quarter from 11 percent in the third, the report showed.

However, the survey revealed that concerns persisted during the fourth quarter over a shortage of working capital and lack of skilled labor.

Among the respondents, 30 percent cited shortage of working capital as the primary factor restraining business expansion, while 27 percent believed the shortage of skilled workers was the biggest constraint, both down 9 percentage points from the third quarter.

PwC's report said it is expecting 80 new IPOs to list in Hong Kong this year, including 65 on the Main Board and 15 on the GEM Board. Total funds raised are expected to be in the range of HK$120 billion ($15.5 billion) to HK$150 billion, a significant increase on 2012.

Jean Sun, a partner at PwC China, said more mainland-based small and medium-sized enterprises will be listed in Hong Kong. This would be following the relaxation of listing requirements for H shares and the beginning of the conversion of B shares into H shares.

The report said more foreign enterprises will be encouraged to list in Hong Kong under the anticipated changes to secondary listing requirements.

"We expect to see a more active IPO market in Hong Kong in the second half of 2013 and major applicants will likely come from financial institutions, energy and mining related companies, and retail and consumer products," said Edmond Chan, a partner at PwC Capital Market Services Group.

huyuanyuan@chinadaily.com.cn

(China Daily 01/08/2013 page15)