The divergence indicates how markets in Shanghai and Shenzhen remain largely sheltered from changes abroad, bankers say, even though foreign buyers have boosted their investments in mainland China in recent years.
IPOs in China raised more than $33.8 billion so far this year, up from more than $30.4 billion a year earlier, according to Dealogic. According to Dealogic, this year’s total is the biggest since at least 2009. That is the year that the data source started granting banks league-table credit for work on onshore listings, once the market was opened to non-Chinese book-runners.
Both main and secondary listings are included in the numbers, which include both firms whose stock had never been traded before and those whose stock was already traded elsewhere.
In comparison, the worldwide dollar value of IPOs plunged 71 percent to more than $90.2 billion during the same time. In Hong Kong, IPO volumes have plummeted 92 percent from a year ago to over $2.2 billion, the lowest point since 2009.
New IPOs have been met with a lack of interest from investors throughout the world. World stock and bond markets have been under pressure due to growing inflation, rising interest rates, Russia’s invasion of Ukraine, and concern regarding the Covid-19 pandemic’s future trajectory. Shares in fast-growing technology companies—a cornerstone of IPO markets in recent years—have been among the most impacted.
While predictions of Chinese growth have plummeted—due in part to rigorous lockdowns—and the benchmark CSI 300 index has declined around 15 percent this year, issuance has remained robust.
According to Selina Cheung, co-head of Asia equities capital markets at UBS, “China’s capital markets have been more stable than those throughout most of Asia, because they are less sensitive to external shocks.”
Ms. Cheung said the bank has a robust pipeline of candidates for IPOs in mainland China and total issuance was expected to stay strong, as many investors had started to see beyond the implications of Covid-19 limitations on firms. Investors are also expecting the government to execute additional measures that boost growth, according to the narrator of the interview.
Traders’ trust in the ability to quickly move in and out of freshly listed equities is bolstered by high trading volumes, bankers say.
Another factor is that Chinese firms are keen to enter the public markets after undergoing a lengthy clearance procedure before being listed on a local exchange.
Cathy Zhang, head of China equities capital markets at Morgan Stanley, stated that “usually when the issuer obtains the green light from the regulator, they prefer to go in the earliest window feasible.”
Investors, on the other hand, have seen positive returns on their onshore equities, or A-shares, according to Ms. Zhang.
For this reason and others, investors are still interested in A-share IPOs, according to her.
Unwritten rules limit the initial value of newly listed companies on China’s major stock exchanges to low amounts.
The energy behemoth Cnooc Ltd., which went public in April for $4.4 billion, was the largest mainland IPO of the year. Due to a Trump-era investment prohibition, the company’s shares were delisted from the New York Stock Exchange last year and are now only traded in Hong Kong. Cnooc’s Shanghai-traded shares have increased by 81% since its initial public offering.
Hong Kong, which has long been a popular location for mainland Chinese corporations to list their offshore securities, is expected to see a resurgence in new listings later this year.
Regulators in Beijing and Washington have ramped up their monitoring of Chinese businesses listed in the United States or enterprises that intend to list there. That has boosted Hong Kong’s attractiveness as an alternative travel location. There is a possibility that Chinese businesses might be delisted from the NYSE as soon as next year due to a disagreement over access to audit documents
Global markets, on the other hand, must become less volatile before negotiations can restart in earnest. China’s economic development, technological control, Covid-19 policy, and U.S.-China audit discussions are other issues for investors. Hong Kong will be included in China’s offshore listings, although definitive guidelines have not yet been issued.
Hong Kong Exchanges & Clearing Ltd., the city’s exchange operator, has said that it had 170 active applications for IPOs on its main board at the end of May.
According to Citi’s Asia-Pacific co-head of equity capital markets, Udhay Furtado, Chinese IPOs “may be the story of the second half” if they begin to surface.
The post Even In The Face Of Turbulence In The Global Ipo Market, New Listings In China Are Shattering Records. appeared first on Best Stocks.