There has been a steep year-on-year (YOY) decline for both the number of IPOs and amount of funds raised in the A-Share market in mainland China during the first half of 2016, according to PwC.
Altogether, 61 IPOs were completed in the A-share market, raising a total of RMB 28.8 billion, representing declines of 67% and 80% for the number and amount respectively, when compared with the same period in 2015.
Among the 61 IPOs in the A-share market in the first half of 2016, 26 listed on the Shanghai Main Board and raised a total of RMB 13.4 billion, with the majority stemming from industry, consumer goods and services sectors.
The Shenzhen SME exchange had 15 listings over the period, which raised a total of RMB 8.3 billion, also mainly in industry, consumer goods and services sectors. There were an additional 20 listings on the Shenzhen ChiNext exchange, which raised a total of RMB 7.1 billion over 1H 2016, predominantly from industry, information technology and telecommunications sectors.
Impact of new regulations
The latest IPO regulations brought into effect in 2016 reform the prior rules governing the purchase of new shares, particularly with regard to payment before purchase. The adaptations have led to a reduction in the impact of new share issues on the secondary market.
“Nevertheless, due to the repeated fluctuations of the A-share market in the first half of the year, regulators have tightened approvals of new shares in an effort to maintain stability of the capital market,” says Frank Lyn, PwC China and Hong Kong Markets Leader.
“The number of A-share IPOs in the second half of the year may be similar to that seen in the first half. We expect the number of A-Share IPO for the whole year of 2016 will reach approximately 120, raising a total of RMB 60 to 80 billion."
The National Equities Exchange and Quotation System, known as the NEEQ, officially launched the NEEQ Listed Company Multi-layer Scheme on May 27, 2016. The Scheme, which aims to improve liquidity and management level of enterprises, is on track to attract increasing numbers of companies to list on the NEEQ.
The NEEQ market has flourished since opening in 2014, a trend which continues to be demonstrated by the number of newly listed company in NEEQ, which increased from 20 per day in the first half of 2015 to 40 per day in the second half of the year.
The number of NEEQ listed company reached 7,685 by June 30, 2016, with total equity of RMB 463.5 billion, fund raising reaching RMB 71.4 billion and trading volume worth RMB 87.4 billion.
"Although reform of the registration system has slowed, the launch of the system is inevitable." Said Jean Sun, PwC Assurance Partner, who went on to note, "With information disclosure at the core, the reform will allow all parties to perform their responsibilities. The registration system reform will help to keep listing procedures in order, improve the quality of listed companies, and strengthen supervision of legal obligations."
Hong Kong is still No. 1 market
Despite slower growth in the Chinese economy, muted global economic recovery and fluctuations in the Shanghai and Hong Kong stock markets, Hong Kong still ranked as the world’s number one market in terms of amount of IPOs and volume of financing, over the first half of 2016.
Over the first half of 2016, 40 companies have been listed in Hong Kong, raising a total of HKD 43.5 billion, decreasing by 22% and 66% respectively, compared with last year.
Notably, the launch of the SZ-HK Stock Connect programme will be a positive influence for the stock markets in both regions, and will further consolidate the critical role that Hong Kong plays in the multi-level capital market of mainland China.
PwC is optimistic about the IPO market in Hong Kong over the second half of 2016, and expects that 2017 will see more vigorous IPO financing activities. Further, it is anticipated that in 2017, there will be 130 IPOs with a total value of HKD 220-250 billion in Hong Kong.