Review of the mainland China and Hong Kong IPO markets for the first three quarters of 2018, and outlook for the rest of the year
Following a strong third quarter, KPMG forecasts total IPO fundraising in Hong Kong to reach more than HKD 300 billion in 2018, with the city expected to be the top IPO destination worldwide.
In the third quarter of 2018 alone, the Main Board is poised to record HKD 190 billion in total funds raised from 40 new listings, exceeding the HKD 122.6 billion recorded in the full year of 2017. This is attributed to the HKD 54.3 billion IPO by China Tower Corp, the largest deal of the period, as well as a number of listings from new economy companies which contributed to almost half of the funds raised in Q3.
Benefitting from a buoyant market, IPO proceeds in the Main Board reached HKD 238.2 billion in the first nine months of 2018, almost triple the amount raised a year ago. GEM continues to be relatively stable, raising HKD 4.6 billion from 67 new listings in the first three quarters of 2018.
Our analysis also highlights that the new listing regime for companies from emerging and innovative sectors is transforming the Hong Kong bourse into a hub for “new economy” companies. Three pre-revenue biotech companies and two with weighted voting right structures completed their IPOs by the end of Q3. We expect to see six to ten pre-revenue biotech companies list by the end of 2018 as the trend continues.
The A-share IPO market has experienced a slowdown in terms of both the number of listings and total funds raised in the first nine months due to a decline in listing approvals. The Shanghai and Shenzhen stock exchanges are expected to raise a combined RMB 122.7 billion from 89 IPOs at the end of Q3, compared to RMB 175.8 billion from 350 IPOs a year earlier.
KPMG expects the industrials and TMT sectors, in particular high-end manufacturing and high-tech companies, to continue to lead in terms of the number of transactions and total funds raised. The financial services sector is also expected to increase its market share, with a number of medium to large-sized financial institutions poised to list in the fourth quarter.
* Note: All figures are based on a combination of data as at 14 September 2018 and KPMG estimates. Excludes listing by introduction.