The Chinese mainland and Hong Kong Special Administrative Region remained the most active regions in the world for IPOs in 2021, accounting for 25 percent and 28 percent of the world’s total by the number of deal and proceeds, according to a report released by consulting firm Ernst & Young on Wednesday.
It is estimated that the Shanghai Stock Exchange and Shenzhen Stock Exchange will rank the second and third among global bourses in terms of IPO deals, the report noted.
A total of 492 companies went public on the A-share market in 2021, the report estimated, raising 536.3 billion yuan ($84.25 billion). The number of IPOs and the amount of funds raised increased by 25 percent and 14 percent year-on-year respectively, both hitting record highs.
During the period, small and medium-sized IPOs saw significant growth compared with the same period last year, said the report. IPOs under 1 billion yuan accounted for 77 percent, up 4 percentage points than 2020.
It is estimated that a total of 94 companies were listed on the Hong Kong market in 2021, with total funds raised amounting to HK$323.7 billion ($41.5 billion). IPO volume and proceeds decreased by 35 percent and 19 percent respectively year-on-year. Five of the top 10 IPOs are the return of China concept stocks, three of which are unicorn companies, accounting for over 90 percent of the proceeds, proving Hong Kong’s leading position in the financial market once again.
Ringo Choi, EY Asia-Pacific IPO leader said: “The mainland and Hong Kong have been imposing rigorous anti-epidemic measures. Progress has been made in the introduction of vaccines, and IPO activities remained stable. Until November, the emergence of the Omicron variant has caused market fluctuations in the stock markets of US, Europe and Hong Kong.”
The return of Chinese concept stocks continues to gain momentum and some overseas companies may turn to the Hong Kong market this year. With Hong Kong’s valuation advantage, the number of companies queuing for IPOs will remain high, according to the report.
Jacky Lai, assurance partner of EY Hong Kong, said: “Hong Kong’s IPO activities will continue to develop vigorously, but we still need to keep an eye on a few objective factors, including the persisting upside risk of global inflation, the potential fluctuations in overseas stock markets due to the US Fed’s tightening cycle process, and the potential pressure on overseas capital outflows due to the Fed’s potential cuts and interest rate hikes. China-US relations and the challenges of the geopolitical landscape also add uncertainties on investment.”
In the mainland, a series of reforms have been implemented, including the new securities law with the registration-based system, the improvement of the Science and Technology Innovation Board (STAR), the return of pilot red-chip stocks and the launch of Beijing Stock Exchange (BSE). “We believe that China’s capital market is entering a new era,” said Choi.
Looking ahead to 2022, Choi said the performance of A-share IPO activities will be subject to the opening of its financial market and other factors that help attract foreign investors. The establishment of the BSE will promote A-share IPO activities throughout next year, especially for small and medium-sized enterprises.
Guangdong-HongKong-Macao Greater Bay Area Photo: VCG
