2024 Q3 Review & Outlook for Chinese Mainland & HK IPO markets

Analysis of the Capital Market Services Group indicates that Nasdaq will take gold in the global IPO race by the end of Q3 2024, mainly due to the listing of the world’s largest IPO so far this year. Hong Kong Stock Exchange is poised to move up into 4th place following the completed listing of the world’s 2nd largest IPO year-to-date. Shanghai Stock Exchange is set to remain in 5th with Shenzhen Stock Exchange in 8th position.

The State Council’s nine new measures and related initiatives introduced since April 2024 have maintained the pace of A-share IPOs. Implementing key measures, heightening scrutiny of the capital market, mitigating risks and uplifting high-quality development remain the regulator’s priorities. This has slowed IPO activity considerably compared to the first three quarters of 2023. These policies will likely remain in place in Q4 2024 and the current pace of IPOs is set to also be maintained.

With measures introduced by the State Council, China Securities Regulatory Commission and stock exchanges being enforced and no change in the pace of IPOs, the A-share IPO market is expected to see fewer IPOs and lower proceeds in 2024, with about 95 to 135 new listings raising approximately RMB65 billion to RMB96 billion. For the full year, the Main Boards in Shanghai and Shenzhen are expected to have 25 to 35 IPOs raising RMB25 billion to RMB43 billion. ChiNext is anticipated to record about 30 to 40 new listings raising RMB18 billion to RMB23 billion, followed by the SSE STAR Market (15 to 20 new listings raising RMB17 billion to RMB22 billion) and Beijing Stock Exchange (25 to 40 IPOs raising RMB5 billion to RMB8 billion.

After years of intensive, in-depth reform, the A-share market has become a multi-tier market. As the measures and policies of the State Council, China Securities Regulatory Commission, stock exchanges and other regulators show their effects further, the A-share market should be able to attract more IPOs from representative technology companies and boost its capacity and functions for high-quality development. When mega offerings can be made to the market again, we look forward to seeing more remarkable results from the Shanghai and Shenzhen stock exchanges relative to their international peers.

The Hong Kong stock market, meanwhile, has seen improved performance since April on measures and policies for IPOs by A-share listed companies and other listing candidates, efforts to boost capital market development, and most recently the US Federal Reserve’s first interest rate cut since March 2020. If a further rate cut is made this year and other fundamentals such as stronger Chinese economic indicators following China's central bank's recent economic stimuli, are shown to improve liquidity inflows, this will help increase the number of large and jumbo listings, which could include listings by leading Chinese companies that have been encouraged by regulators to list in Hong Kong. Hong Kong could therefore gain a foothold in the top 4 IPO ranking for 2024.

With nearly 100 listing applicants, including some potential large and mega IPOs, consumer, artificial intelligence, hard tech, life sciences and green and sustainable companies, and the recent listing of the world’s 2nd largest IPO year-to-date, the CMSG maintains its full-year forecast for the Hong Kong IPO market at HKD60 to HKD80 billion in funds raised from 80 IPOs.

When the market conditions could once again become conducive to large and mega deals, Hong Kong may have even more stellar results by the end of 2024. Reforms by Chinese mainland and Hong Kong regulators, including those under Stock Connect, such as making dual-counter equities available to Chinese mainland investors and expanding eligible exchange traded funds, and collaboration agreements with Middle East and Malaysia stock exchanges, are expected to form a strong backbone for sustained growth in Hong Kong’s IPO market.

In Q3 2024, as A-share IPO activity slowed, listing in the US remained a popular alternative for Chinese companies, especially those in the technology sector. Since A-share market activity remains muted, we expect Chinese companies to continue to turn to the US to seek funds for development and look forward to seeing more sizable Chinese companies listing in the US as another preferred choice after the domestic market.