Shanghai exchange ranks second in global fundraising; STAR Market maintains popularity
While overall market sentiment in the first half of the year was affected by the COVID-19 pandemic and economic concerns, Hong Kong proved more resilient than most bourses globally, with new economy listings seen as a key driver, according to KPMG analysis. Closely trailing NASDAQ, the Shanghai Stock Exchange meanwhile came second in terms of funds raised, backed by sizeable listings and the STAR market’s continuing popularity.
KPMG’s latest analysis finds that proceeds from global IPOs in the first half of 2020 decreased by 8 percent to USD 68.8 billion compared with the same period last year, mostly due to a decline in the funds raised in major stock exchanges in the US and Europe. The showing was partly offset by an increase in fundraising in the Asia market, especially the Shanghai Stock exchange. Nevertheless, mainland China and Hong Kong held firm as key contributors. By the end of June, the Shanghai Stock Exchange and Shenzhen Stock Exchange are expected to record a total of 124 new listings, for a total of RMB 141.7 billion, while the STAR market is anticipated to tally 49 new listings, amounting to RMB 52.3 billion. This will mark an increase of 135 percent in the A-share market in terms of funds raised compared with the same period last year.
The Hong Kong Stock Exchange raised a total of HKD 87.3 billion in the first half of 2020 from 59 new listings, marking a total increase of 22 percent in total funds raised compared with the same period last year. Since the launch of a new listing regime in April 2018 allowing listing of pre-revenue biotech companies and new economy companies with WVR structures and secondary listing of qualifying companies, Hong Kong has successfully tallied 23 firms under the regime and raised a total of HKD 275.9 billion.
Paul Lau, Partner, Head of Capital Markets, KPMG China, says: “For the remainder of 2020, the global capital market is expected to face challenges stemming from the pandemic, coupled with market uncertainty. Opportunities lie ahead for the IPO market to channel much-needed capital into virus-hit companies and new economy firms around the world to ride out global economic turbulence. Hong Kong in particular is well-positioned to benefit as listing reforms have made the city more attractive to tech and innovation companies.”
KPMG’s findings reflect revived IPO activity in mainland China. Coupled with the success of the STAR market, this has driven strong interest in technology and strategically emerging sectors. Building on the success of the STAR market, Shenzhen’s ChiNext board launched a registration-based system, and the ChiNext’s first batch of registration-based IPOs is expected to debut in the third quarter of 2020.
Louis Lau, Partner, Capital Markets Advisory Group, KPMG China, adds: “Following the implementation of a registration-based mechanism in the STAR market, the ChiNext board is officially launching a similar system for IPOs. Such reform will increase investment and diversity in the A-share market while enhancing liquidity.”
The TMT sector dominated fundraising in Hong Kong, supported by sizeable secondary listings from NetEase and JD.com, both US-listed, China-based companies that raised a total of HKD 54.4 billion, representing over 62 percent of the total funds raised for the year. Their listings follow the ‘homecoming’ success of Alibaba’s secondary listing in Hong Kong last year.
Irene Chu, Partner, Head of New Economy and Life Sciences, Hong Kong, KPMG China, says: “The new economy including biotech companies’ listings dominated Hong Kong’s capital markets in the first half of 2020 representing 77 percent of the total funds raised and we expect that trend to continue into the second half of the year. The pandemic has not only accelerated the inevitable transformation to a digital economy, it also boosted capital investments in life sciences and technology businesses that are needed more urgently than ever to offer better solutions in drug development, healthcare, supply chain, logistics, education and sustainable development.”
For the rest of the year, global market sentiment is expected to continue to be affected by economic uncertainty, which could affect short-term access to IPO funds. Hong Kong however is expected to hold steady as a high-ranking global IPO market, and the homecoming of China-based companies and the healthcare/life sciences sector are likely to continue as key market drivers, leading to a forecasted fundraising total of HKD 200 – 250 billion in 2020.
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