The performance of China's A-share initial public offering market was strong in the first quarter of 2017. A total of 134 initial public offerings worth a combined RMB70 billion (US$10 billion) were recorded, the highest first quarter figures since 2014, according to numbers released by KPMG.
Within that total, the Shanghai Stock Exchange recorded 65 IPOs with a combined RMB42 billion raised, up from nine new listings and RMB5.1 billion raised over the same period of time last year.
The Shenzhen Stock Exchange, on the other hand, saw IPO volumes hit RMB28 billion from 69 IPOs, both of which were four times higher than first quarter 2016. Shanghai and Shenzhen were ranked second and third globally in terms of total IPO proceeds raised during the past quarter.
The strong performance of the A-share IPO markets can be attributed to an accelerated approval process, experienced since late 2016. This has helped reduce the number of A-share IPO applications from 681 in end of December 2016 to 600 in end of March 2017. A shorter waiting list has helped reinvigorate interest for companies to list their shares.
In the first quarter, 101 companies currently trading on the National Equities Exchange and Quotations (NEEQ) have filed for pre-IPO tutoring, which was a 60% increase from the previous quarter.
The Mainland China stock market grew steadily on the back of a stabilizing economy and improved market sentiment, providing a favorably environment for new listings. Also, the supply side and state-owned enterprises reform, together with the debt-to-equity swap programs and other deleveraging policies provide additional support for the IPO market. KPMG expects the strong momentum to continue for the rest of the year, thanks to a stabilizing economy in China and favorable policies.
In Hong Kong, the IPO market was active in terms of the number of new listings, particularly in respect of Growth Enterprise Market (GEM) listings. Some 39 companies (20 on the main board and 19 on the Growth Enterprise Market) went public in the first three months of 2017, increased from 13 listings on main board and six on the GEM same time last year.
However, IPO proceeds recorded a year-on-year decline of 56% to HK$13.3 billion due to the absence of sizeable deals. The average deal size for main board listings was HK$600 million, the lowest first quarter figures since 2010.
Nevertheless, positive trends are emerging for the Hong Kong IPO market. A diversification in terms of geography and the sectors is happening as companies from other Asian countries eyeing opportunities in China are increasingly interested to list in Hong Kong. While companies from non-financial services sectors, including education, technology healthcare and life sciences, are also playing a more important role.
In the first quarter, two overseas companies listed in Hong Kong, while more than 10 overseas companies are in active application status. KPMG believes the continuing diversification of Hong Kong’s IPO market could enhance the attractiveness and competitiveness of the city’s capital markets.