Daily Management Review

China's IPO Applications Are Increasing, Breaking The Worldwide Trend, As COVID Restrictions Are Relaxed


China's IPO Applications Are Increasing, Breaking The Worldwide Trend, As COVID Restrictions Are Relaxed
A surge in Chinese company listing applications in June almost doubled China's IPO candidates to nearly 1,000, the biggest in at least three years, potentially making China a bright spot for bankers while equity offers lag in other markets.
According to bankers, the rush was prompted in part by China's relaxation of COVID restrictions last month. IPO applicants hurried to submit their applications by June 30 in order to avoid having to update them with first-half results, which would further delay the process.
"Financial data has a life of six months in IPO applications, which is why you often see a rush ahead of June 30, and December 31," said a Chinese banker who declined to be identified because he was not authorised to speak to the media.
"In addition, many projects were hampered by the COVID outbreaks previously," he added, referring to the two-month COVID-19 lockdown of Shanghai that ended on June 1.
The $1.71 billion offering of Tianqi Lithium (002466.SZ) next week in Hong Kong is a welcome boost for the city's faltering capital markets, but it is not anticipated to spark other deals as global financial markets remain unpredictable.
"It's a secondary listing in a hot sector like batteries. We will need to see more activity before we can declare the IPO market is back," one banker working on the deal who could not be identified told Reuters.
The solid pipeline in China indicates that the country's IPO market, which was the world's largest by fundraising in the first half, will continue to thrive in the second half. In terms of IPO volume, Shanghai's STAR Market led the world in the first half of this year.
Among the major planned IPOs in China, Swiss agrochemicals company Syngenta is widely expected to list on the STAR Market by the end of the year, raising an estimated $10 billion in what could be China's largest float this year.
According to exchange documents, others include Shanghai United Imaging Healthcare Co's planned $1.9 billion share sale and an expected $1 billion offering by US-blacklisted artificial intelligence (AI) company Megvii.
Both will be listed on STAR and are nearing the end of the verification process.
Investors are also keeping an eye on Jack Ma's Ant Group's prospective IPO resuscitation, which insiders say has received a provisional green light from China's central government. According to official data, Chinese regulators and stock exchanges accepted 444 listing applications in June alone, raising the total number of IPO hopefuls in the pipeline to 933.
In comparison to the same period last year, total listing applications increased by 31 per cent at STAR Market, Shenzhen's ChiNext, and the Beijing Stock Exchange, China's three market places that have adopted the US-style registration IPO system.
"I expect China's economy to revive in the second half, giving a boost to the IPO market," Felix Fei, partner at accounting firm EY, said.
According to a KPMG report, China's IPO pipelines are heavily concentrated in creative and strategic industries such as industrial manufacturing, TMT, healthcare, and energy.
According to Louis Lau, Partner Capital Markets KPMG China, a likely domestic economic rebound will "provide a favourable climate for fund-raising," which may also benefit from a projected expansion of China's IPO reform.
According to KPMG, IPO volume in Shanghai and Shenzhen totaled $46.3 billion in the first half, representing for approximately half of worldwide IPO proceeds, with COVID, economic uncertainty, and rising geopolitical tensions weighing on equity deals.