Hong Kong has secured the position as the fourth largest listing venue in the world, followed by Shenzhen, while Shanghai is ranked the ninth, according to professional services organisation Deloitte Touche Tohmatsu, based on proceeds raised in initial public offerings (IPOs) in 2012.
Amid slower IPO activities in the first three quarters and intense competition from other bourses in the region, Hong Kong still managed to rise to the fourth place with over half of the IPO proceeds raised in the year coming from the last quarter.
During the year, the city recorded 62 IPOs, raising HK$89.8 billion (US$11.5 billion), down 31% and 67% from 90 new listings and HK$271.4 billion (US$35 billion) in 2011, respectively.
Shenzhen and Shanghai
Market sentiment had been hammered by the credit downgrade of the Eurozone countries, China's GDP cut and slower-than-expected U.S. economic recovery in the first three quarters, followed by an improvement in the last quarter as the third round of the Qualitative Easing and European Central Bank's Outright Monetary Program were launched.
Following a cooling economy and significant slowdown in listing application review, the two exchanges in Shenzhen and Shanghai recorded 154 new listings in total, raising RMB103.4 billion collectively, a year-on–year decrease of 45% and 63% respectively.
The Shenzhen Stock Exchange raised HK$86.0 billion (US$11 billion), while the IPO proceeds raised by Shanghai Stock Exchange were merely HK$40.9 billion (US$5 billion).
With higher deal flow and the mega listing of Grupo Financiero Santander México (Santander Mexico), this year's third global largest IPO, the New York Stock Exchange led the worldwide IPO market despite the fact that the NASDAQ had Facebook's listing, the world's largest IPO of the year.
Although Hong Kong had two mega IPOs from Haitong Securities and the People's Insurance Company (Group) of China, its proceeds still lagged behind those of the Tokyo Stock Exchange, which had the re-listing of Japan Airlines, the second largest IPO worldwide in 2012.
"Without any heavyweight listings, the IPO funds raised by the two exchanges in Shenzhen and Shanghai shrunk significantly year-on-year," says Edward Au, Co-Leader of National Public Offering Group of Deloitte China.
As a result of lower valuation for A-share IPOs stemmed from market transformation and weak corporate earnings, their respective IPO proceeds can only trail those of Hong Kong.
The Bursa Malaysia surpassed the Shanghai Stock Exchange with proceeds from two mega deals, FELDA Global Ventures and IHH Healthcare, the fifth and sixth global largest IPOs of the year.
In 2013, Hong Kong will continue to be the major fundraising hub for Mainland companies. Majorities of the new IPOs would come from small and medium-sized Mainland companies while more international companies are expected to list in Hong Kong.
The city is expected to see 70-80 new listings, raising around HK$100-150 billion. The deal flow and deal volume would be 13-29% and 12-68% higher when compared with this year.
On the back of China's 12th Five-Year Plan and policies that drive new urbanization and domestic demand, majority of the proceeds would come from financial service institutes, such as city commercial banks, and companies from infrastructure-related and retail and consumer sectors.
As for the Mainland market, about 150 companies are foreseen to raise approximately RMB100 billion through IPOs, both at about 3% less than those of this year.
New listings from the priority sectors, such as cultural industry, and the seven strategic emerging sectors, including high-end manufacturing and energy efficiency and environmental protection, are expected to draw the market's attention.
Au expressed his cautious optimism towards the outlook of Hong Kong's IPOs in 2013, citing the 'go global' strategy of Mainland companies and China's 12th Five-Year Plan for Financial Sector Development and Reform as the main drivers of the moderate rebound of IPO activities.
"In 2013, Hong Kong has a strong potential to become one of the top three global IPO venues again," he said. "We think the recent relaxation of the H-share listing requirements for Mainland companies would spur some of the A-share IPO applicants to switch to list on the Main Board of Hong Kong."
"At the same time, as the valuations of A shares and H shares are narrowing down due to the A-share market reform, we believe those, which can meet the listing requirements of the Hong Kong Stock Exchange (HKEx), would be some of the 400 companies that are queuing up for listing on the Shenzhen SME Board and Shanghai Main Board," added Au.
Au notes that the reform of the Mainland's capital market and the relaxation of the H-share listing requirements will also fuel the prevalent trend of the conversion of B-share companies into H-share, another major market spotlight next year.
About 40 B-share companies that are dually listed on the A-share market and can meet HKEx's listing requirements are likely to be the potential candidates of this conversion. Given their long track record of sustainable financial performance, their conversions are expected to be well received by investors.
Anthony Wu, China A-Share Capital Market Leader of National Public Offering Group of Deloitte China concluded that Mainland IPO activities are more likely to take off after the Chinese New Year upon the launch of another round of market reform measures.
In view of the evolving industry growth and sustainability of the business operations, about 20-25% of the IPO applicants may withdraw their listing filings or reconsider their listing strategies in the first quarter of 2013.
But throughout 2013, the outlook of the A-share IPO market is likely to remain challenging on the back of continuous market transformation.