Affected by global economic uncertainties, market fluctuations and many other factors, the Shanghai and Shenzhen stock exchanges listed only 155 IPOs in total in 2012, with total funds raised RMB108.3 billion (US$17.4 billion), showing the 2012 IPO market to be less encouraging than in previous years, reports PricewaterhouseCoopers.
In 2011, the Shanghai and Shenzhen stock exchanges listed 282 IPOs, raising a total of RMB 286.1 billion (US$46 billion) in combined IPO funds, showing a decrease of 45% and 62% respectively in 2012.
More specifically, the Shanghai A-share market attracted 26 IPOs in total in 2012, raising RMB 38.3 billion (US$6 billion) in funds, down 33% and 64% respectively compared to the year before.
The Shenzhen SME Board listed 55 IPOs, down 52% on last year, with funds raised reaching RMB 34.9 billion (US$5.6 billion), a decrease of 66%. ChiNext listed 74 IPOs, down 42% on last year, with fund raised reaching RMB 35.1 billion (US$5.64 billion), a decrease of 56%.
In terms of the industries that attracted IPOs in 2012, within the three markets, industrial products continued to dominate, ranking first, with retail and consumer goods & services ranking second in the Shanghai A share and Shenzhen SME Board.
Information technology & telecommunications had a good year, surpassing financial and energy & mining industries to third place on the Shanghai A share, and second in ChiNext, while remaining third in the Shenzhen SME Board.
“Business performance has been affected by the continuous uncertainties of the global economy. As a result, investor interest for IPOs slightly cooled. This made the performance of the IPO market in 2012 less encouraging than that in previous years,” said Frank Lyn, PwC China and Hong Kong Managing Partner.
According to Lyn, there are over 830 enterprises now waiting for a listing in the Shanghai and Shenzhen stock markets. These enterprises have accumulated a certain amount of energy indicating an active IPO market in 2013, but their fund raising plan will be affected by the impact of future economic and political trends and market confidence, etc.
GDP growth in 2013 is likely to be higher than in 2012 due to government stimulus measures, and IPO markets will be slightly up. PwC is expecting 200 IPOs with funds of between RMB 130 billion and 150 billion to be raised on the Shanghai and Shenzhen stock markets in 2013.
The domestic IPO market has been slow since last October. Enterprises applying for IPOs have encountered difficult situations due to long waiting time and tightening regulations.
Some have seen a decline in performance, some have considered withdrawing their applications, some have even considered turning to other markets, such as the “new third board”, H shares.
PwC China Assurance Partner, Jean Sun points out: “No matter where a company wants to list, the priority should be to improve management, achieve business performance goals and adhere to regulations in order to strengthen investor confidence.”
“Furthermore, an IPO should not be seen as an endpoint, in fact it is a new beginning. Enterprises should take the opportunity to develop long-term strategies once they have achieved an IPO to bring rewards to their investors. In the meantime, while companies wait for listing approval, we suggest they use this time as a period of reflection, focusing on business development and corporate management, perfecting their listing plans, so that when the time comes they are fully prepared.”
Globally, 2012 was an outstanding year for the United States considering the general decline of IPO markets across most nations. Funds in the US saw an increase of approximately 13% compared to 2011, with funds raised on the Nasdaq and NYSE reaching about RMB 253.7 billion.
Hong Kong is ranked 4th globally in terms of funds raised. In Hong Kong, the total funds raised through IPOs was HK$89.8 billion (equivalent to about RMB 72.2 billion), down 65% on 2011 (HK$272.3 billion).
The number of newly listed companies totalled 64, down 40% compared to the year before. Among the 64 listed companies, 52 were on the Main Board (2011:89). Twelve turned to the GEM Board to raise funds in 2012 (2011:13).
PwC is expecting 80 new IPOs to list in Hong Kong this year, including 65 on the Main Board and 15 on the GEM Board. The total funds raised in 2013 are expected to be in the range of HK $120-150 billion, a significant growth compared to 2012.
“We expect that more mainland-based small and medium-sized enterprises will be listed in Hong Kong following the relaxation of listing requirements for H shares and the beginning of the conversion of B shares into H shares," says Edmond Chan, PwC Capital Market Services Group Partner.
Chan adds that more foreign enterprises will be encouraged to list in Hong Kong under the anticipated changes of secondary listing requirements.
"We expect to see a more active IPO market in the second half of 2013 and major applicants will likely come from financial institutions, energy & mining related companies and retail & consumer products,” says Chan.