New Year holds promise for China IPOs after a record 2022 haul

BEIJING – Chinese companies

raised a record amount in initial public offerings (IPOs) at home in 2022,

defying a global slump. And with the

end of zero-Covid in sight,

2023 could be set for another strong showing.

Listings in Shanghai, Shenzhen and the recently inaugurated Beijing exchange brought in US$92 billion (S$124.4 billion) in 2022, according to data compiled by Bloomberg. That has propelled China’s share in the global tally for IPO proceeds to 46 per cent, nearly four times that of the United States, from just 13 per cent at the end of 2021.

After a push by the local authorities in recent years, a slew of factors have enabled the feat.

Policy easing in the country has been a key catalyst, just as rising borrowing costs deterred listings in traditional venues such as Hong Kong and London. At the same time, China’s crumbling real estate market forced many investors to look for an alternative to put their money to work.

“The pipeline of high-quality Chinese companies with ambitions of an IPO has only grown during 2022, and will continue to do so throughout 2023,” said Mr James Bean, a portfolio manager at Myriad Asset Management.

“Many of these will look to raise capital as soon as there is further evidence of success in the transition to a post zero-Covid economy and support for the domestic labour market,” he added.

Past performance has also played a role in luring buyers. Newly listed shares in China tend to fare much better on average than the overall market due to valuation rules that regulate IPOs.

Overall, there have been 391 debuts in China in 2022. Nine of them raised above US$1 billion, accounting for about 40 per cent of all deals of that size or bigger globally. New York bourses hosted only two IPOs of that magnitude, Hong Kong had three and Europe had just one, in Germany.

China’s domestic pipeline for 2023 is solid. About 376 companies have announced IPO plans over the past six months that are now under pending status, data compiled by Bloomberg shows, meaning they could go public in 2023.

Shares of mainland IPOs are up by a weighted average of 29 per cent in 2022 over their listing price, versus a 5.5 per cent increase in New York and a 6.2 per cent drop in Hong Kong.

To be sure, the domestic market cannot entirely fulfil funding needs for Chinese companies. Valuation rules are strictly set by regulators, the investor universe is not nearly as diversified as in Hong Kong, and the time needed ahead of a listing is much longer than abroad. 

With the US market almost entirely shut for Chinese issuers, many of those listed in the mainland chose to sell shares in Europe, particularly in Switzerland, a trend that is also expected to continue in 2023.

More large listings could also return to Hong Kong once market sentiment improves.

BLOOMBERG