Report notes IPOs' strong momentum on the Chinese mainland

Initial public offerings on the Chinese mainland markets maintained a strong momentum in the first half of the year despite the COVID-19 pandemic, according to a private report. 

The A-share markets saw IPO volume and fundraising both increasing significantly in the first six months over the same period last year, with 118 new listings and 139.3 billion yuan (US$19.71 billion) in total funds raised, an increase of 84 percent and 131 percent respectively, PwC said in its latest report released on Thursday.

The average fundraising amounted to 1.2 billion yuan in January-June compared with 0.9 billion yuan in the same period last year.

In the first half of 2020, due to a large number of new technology companies listed on the STAR Market, the Shanghai Stock Exchange ranked first based on IPO volume (73 IPOs) and ranked second in terms of funds raised (111.7 billion yuan) in the global market.

The main Shanghai board issued 27 IPOs with 60.9 billion yuan, while the STAR Market had 46 IPOs which generated 50.8 billion yuan. 

"This year, the STAR Market celebrated its first anniversary in June, and marks the bourse’s exemplary role in supporting and encouraging listings of 'hard technology' enterprises with great success," the report said.

In the first half, the STAR Market’s IPO volume and fundraising exceeded the sum of the Shenzhen SME Board and Shenzhen ChiNext. To date, the number of listed companies on the STAR Market has exceeded 100 and gained a total market value of over 1.7 trillion yuan.

"The pandemic has certainly had an impact on the global capital market, but despite the uncertain macro environment and impact of the COVID-19 outbreak, A-share IPOs remained active in the first half of the year," said Thomas Leung, PwC China’s markets leader.

Of note, the STAR Market performance remained strong and met expectations, with the pilot registration system having achieved phased success. At the same time, the launch of the new securities law and orderly reform of ChiNext Board are conducive to the listing activities of Chinese enterprises, Leung added.

He expected the A-share market to continue to thrive in the second half, with over 300 IPOs and total fundraising of over 300 billion yuan in 2020.

From an industry perspective, the first half saw the Shanghai main board IPOs account for mainly industrial products, consumer goods and services, while the STAR Market IPOs were mainly from information technology, telecommunications and industrial products. Shenzhen SME Board and ChiNext IPOs were mainly from industrial products, the report said.

However, fewer IPOs were from the financial sector compared with the same period last year. 

The largest IPO in the first half was the Beijing-Shanghai High-speed Railway, which raised over 30 billion yuan.

"From ChiNext Board’s registration system reform, the innovation of listing of red chip enterprises in China, to the New Third Board’s selection layer transfer board guidance, all steps toward the reform of the A-share market has steadily advanced and demonstrates China’s determination to promote the reform of the capital market, and establish the multi-level capital market,"said Jean Sun, firmwide corporate services partner of PwC China.

IPO activities will be affected by many factors in the second half of the year, according to PwC. 

Sino-US relations will face new challenges, the global pandemic situation, and economic and trade situations are uncertain, and economic growth will be under multiple pressures, the report said, while accelerated reform of the Shenzhen ChiNext registration system and the establishment of a multi-level capital market can be conducive to the listing of innovative SMEs.