A-share IPOs ascending toward unchartered territory

Initial public offerings (IPO) on A-share markets doubled in the first half of 2021 and will remain active in the second half, according to consulting firm PwC, which expects A-share IPO fundraising to reach a record high of more than 500 billion yuan (US$77.17 billion) in 2021.

The number of IPOs and total funds raised in the first half of 2021 increased significantly over the same period last year: 245 new listings and 210.9 billion yuan in funds raised, up 108 percent and 51 percent respectively, according to a PwC report released on Friday.

"Thanks to the rapid and stable recovery of China's domestic economy and the success of the phased introduction of the registration system, the A-share IPO market developed well in the first half of the year," said Thomas Leung, markets managing partner of PwC China. "The STAR Market and Shenzhen ChiNext became new forces for listings, and the number of A-share IPOs doubled."

There were 70 percent more A-share IPOs issued through the new registration system than through the existing audit system. Funds raised in this way were 59 percent higher. 

The first half of 2021 saw 86 IPOs on the STAR Market and 85 on Shenzhen ChiNext – the top two boards for listings – while the Shanghai main board accounted for the most funds raised with 74.1 billion yuan.

"With the promotion of the 14th Five-Year Plan (2021-2025), favorable policies to assist IPOs and further implementation of the registration system, the IPO market will continue to be active in the second half of the year. We expect 430 to 490 A-share IPOs and fundraising to reach a record high of more than 500 billion yuan in 2021," Leung said.

Specifically, carbon neutralization will be an important driving force for the sustainable development of China's economy over the next 40 years, and is expected to contribute more than 2 percent to annual GDP growth. 

Energy systems will need more than 120 trillion yuan of investment, which will drive further investment in related fields to reach 400 trillion yuan. 

More investors are favoring companies related to environment, social and governance, or ESG, applying these non-financial factors to their analysis process to identify material risks and growth opportunities.

In the A-share market, the number of ESG-related IPOs increased significantly to 21 in the first half of the year, or 9 percent of the total. In all of 2020, there were 25 ESG-related IPOs, accounting for 6 percent of the total.

In the next three decades, China needs to add an estimated 138 trillion yuan of green investment to achieve carbon neutrality, and investment in ESG-related enterprises will become increasingly hot.

"The multi-level A-share capital market provides more financing platforms for all types of qualified enterprises. The ongoing improvement and implementation of the registration system, along with the introduction of new delisting rules, will help build an A-share ecosystem where the strongest will thrive, improving the quality of listed companies," said Jean Sun, firm-wide corporate services partner at PwC China.