EY report: A-share IPOs, funds raised to hit record in 2021

The number of A-share initial public offerings and the amount of funds raised will both hit record highs in 2021, according to the latest EY report.

The A-share market is estimated to see a total of 492 IPOs in 2021, raising funds exceeding 536.3 billion yuan (US$84.5 billion), surging 25 percent and 14 percent year on year, respectively, and hitting new records, financial service company EY revealed on Wednesday.

Globally, 2021 has seen robust IPO activities. Year to date, a total of 2,388 companies went public, raising US$453.3 billion with increases of 64 percent and 67 percent by volume and proceeds, respectively, compared with the same period last year.

Among all regions, the Chinese mainland and Hong Kong continued to be key drivers of global IPO activities, with listings by deal volume and proceeds accounting for 25 percent and 28 percent, respectively, of the world's total.

Of note, the Shanghai and Shenzhen stock exchanges are expected to rank second and third, respectively, among global bourses by the number of IPOs.

In terms of funds raised, six Chinese companies dominated the world's top 10 IPOs. Among them, the leading sectors include technology and automotive and transportation, while power and utilities and life science are the up-and-coming industries on the leaderboard this year.

EY Assurance Partner Felix Fei said that "The Chinese mainland and Hong Kong have been imposing rigorous anti-pandemic measures. Progress has been made in the introduction of vaccines, and IPO activities remain stable."

On the mainland, a series of reforms has been launched, including the new securities law with the registration-based system, the improvement of the Star Market in Shanghai, the return of pilot red-chip stocks, and the launch of the Beijing Stock Exchange, Fei said.

"We believe that China's capital market is entering a new era," Fei said.

Since the implementation of the registration-based system launched by the State Council, China's cabinet, in October 2020, seven out of the top 10 IPOs were conducted under the registration-based system with total proceeds of 62 billion yuan, representing 44 percent of total funds raised.

The registration-based system significantly impacted both the total number of IPOs and the amount of funds raised, representing 75 percent and 64 percent, respectively. The ChiNext Board has led in IPO deal volume.

The BSE, which opened in November 2021, saw the number of IPOs and funds raised on the bourse accounting for 2 percent and 0.4 percent respectively of the overall total.

China is also attaching greater importance to the quality of IPOs instead of the number.

In 2021, several policies and measures were issued to improve the quality of new stock issuance. Although the number of IPOs is on the rise, the number of companies forced to withdraw their listing due to strict scrutiny of the registration-based system is also surging, with the passing rate dropping from 95 percent to 88 percent.

Fei believed that the introduction of such measures will help upgrade the overall standard of new stock issuance, saying "this can deepen the reform of the A-share market, where only the fittest will survive."

"The China Securities Regulatory Commission, the Shanghai and Shenzhen stock exchanges and the Securities Industry Association have updated a series of regulatory requirements in September for issuance and underwriting under the registration-based system. These rules will help develop a better market standard."

Among sectors, industrials and TMT (Technology, Media and Telecom) ranked top in the number of deals and proceeds, respectively. Biotechnology and health care entered the top five by the number of deals and proceeds.

Looking ahead, EY said the mainland market will remain reasonably abundant in liquidity, with possibly greater elasticity in the first half of 2022 than in the second half year.

The establishment of the BSE is expected to drive IPO activities throughout the year, especially for small and medium-sized enterprises.

Stakeholders will benefit from carbon neutrality-related IPOs, as related policies will gradually be rolled out in line with nation's carbon peak and carbon neutrality goals, it said.