The persistent economic challenges in China are expected to extend the decline in equity offerings, with a combination of a sluggish economy and stringent regulations impacting new listings. In 2023, both mainland China and Hong Kong witnessed a 43% drop in new and additional share sales compared to the previous year, totaling $96.3 billion—a decade-low in annual proceeds. This starkly contrasts with a 51% increase in the volume raised in the US and a 14% rise in Europe.
Chinese companies have exercised caution in conducting stock sales due to a gloomy economic outlook and diminishing expectations for a substantial stimulus program. The CSI 300 Index in China has slumped by 14% this year, while the Hong Kong benchmark experienced a more significant decline of over 15%.
Selina Cheung, Co-Head of Asia Equity Capital Markets at UBS Group AG in Hong Kong, emphasized the need for a top-down policy approach to support the economy and rebuild investor confidence. She expressed hope for the return of international capital to the Chinese market.
Beijing’s measures to curb the pace of initial public offerings (IPOs) could further impede companies’ plans to enter the market. The stock performances of IPOs have also waned, with the average first-month gain dropping to 22% in 2023 from 27% in 2022 and a substantial 81% in 2021.
The slowdown has repercussions for Chinese brokerages, which have slipped from the top of the global equity-underwriting league tables. In 2023, only 16 new share sales larger than $500 million were hosted by bourses in Shanghai, Shenzhen, Beijing, and Hong Kong, down from 39 in the previous year.
Hong Kong, traditionally Asia’s preferred listing hub, is poised for its worst year in terms of IPO proceeds since 2001, highlighting the overall poor sentiment.
Despite the current challenges, there are signs that the tide may turn. The month of December has seen a surge in companies seeking pre-IPO guidance, many of which are planning to list on the Beijing stock exchange, according to a report by Shanghai Securities News.
Looking ahead to 2024, attention is focused on potential large deals, including Syngenta Group’s deferred offering of 65 billion yuan ($9.1 billion) and the debut of Cainiao Smart Logistics Network Ltd., the logistics arm of Alibaba Group Holding Ltd., which could raise at least $1 billion.
Cheung from UBS noted, “Some big, blockbuster IPOs being approved would be helpful to draw some of that liquidity back.”
