Mainland China and Hong Kong expected to finish 2020 as top IPO destinations after strong Q3, KPMG analysis finds
Shanghai Stock Exchange ranks first in terms of funds raised and number of listings year-to-date; Chinese companies' secondary listings and growing innovation and new economy ecosystem are key highlights for Hong Kong bourse
HONG KONG, Sept. 28, 2020 /PRNewswire/ -- The Shanghai Stock Exchange is expected to claim the top spot globally in terms of both IPO fundraising and number of listings year-to-date as at end of the third quarter of 2020 while Hong Kong ranks third globally, according to KPMG's latest analysis. There is a significantly increasing number of US-listed China-based companies returning for secondary listings in Hong Kong, with a total of seven such listings together contributing approximately 48 percent of the total funds raised year-to-date, making Hong Kong an even more important capital-raising venue with a growing ecosystem for innovation and new economy companies. The two markets are expected to secure the top spots in the global IPO markets ranking for 2020.
KPMG's 2020 Q3 review of the Mainland China and Hong Kong IPOs and other market trends shows, in terms of global ranking by IPO proceeds for the year to 22 September, the Shanghai Stock Exchange (SSE), Hong Kong Stock Exchange (HKEX) and Shenzhen Stock Exchange (SZSE) claimed the first, third and fifth places respectively, with total funds raised reaching USD 38.2 billion, USD 23.4 billion and USD 10.5 billion respectively.
Paul Lau, Partner, Head of Capital Markets, KPMG China, says: "Despite global capital markets facing significant challenges fostered by COVID-19 and market uncertainty, total funds raised in 2020 are expected to increase by over 30 percent by the end of Q3 compared with the same period last year, boosted by the A-share and Hong Kong IPO markets. Opportunities lie ahead for the IPO market to channel much-needed capital into virus-hit companies and new economy firms to ride out global economic turbulence."
Shanghai and Hong Kong recorded the three largest global IPOs in the third quarter, with Shanghai's STAR Market witnessing the IPO of Semiconductor Manufacturing International Corp., which raised USD 7.4 billion, followed by JD.com on the Hong Kong Stock Exchange (USD 4.4 billion) and Beijing-Shanghai High Speed Railway Co., Ltd. in Shanghai (USD 4.4 billion). The dual listing of Ant Group in Shanghai and Hong Kong is expected to give a further major boost to the two markets' performance in terms of funds raised in the next quarter.
2020 marked the most active Q3 year-to-date period for the A-share market in terms of funds raised since 2011. The Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE) are expected to record 294 new listings worth a combined RMB 355.7 billion by end of the third quarter. The solid performance was backed by the continuing popularity of the STAR Market, which contributed 53 percent of the funds raised in the A-share market for the first three quarters of 2020, driving the SSE to rank first among global exchanges in terms of both the number of listings and total funds raised. Backed by a solid pipeline of over 200 listings, the STAR Market is expected to remain the major contributor to the A-share IPO market for the rest of 2020.
Louis Lau, Partner, Capital Markets Advisory Group, KPMG China, adds: "The ChiNext board is expected to support growth-oriented innovative start-ups with funding needs and complement other boards to form a multi-level capital market system. It will also increase market inclusiveness and coverage, driving more high-quality companies to get listed in the A-share market."
Hong Kong reaped the benefits of US-listed Chinese enterprises returning to do secondary listings in the city, raising HKD 210.6 billion across 99 IPOs by end of Q3 – a 57 percent increase in terms of funds raised compared with the same period last year. During the period, seven US-listed Chinese companies – including JD.com, NetEase and Yum China – completed their secondary listings, raising a total of HKD 102.0 billion. More US-listed, China-based companies are expected to follow suit for the rest of the year.
With regard to sectors, TMT and Industrials comprise over 60 percent of the current pipeline of the registration-based STAR Market and the ChiNext board and are expected to remain key driving forces in the A-share IPO market. Whereas in Hong Kong, healthcare and life sciences is expected to remain one of the major contributors to the IPO market for the rest of the year as the COVID-19 pandemic has created a need for robust healthcare services and capital investments.
Irene Chu, Partner, Head of New Economy and Life Sciences, Hong Kong, KPMG China, comments: "IPOs in Hong Kong and mainland China will continue to be driven by new economy companies. As digital transformation has accelerated amid COVID-19, the demand for tech-enabled solutions in areas like telehealth, remote learning, drug development and logistics is growing. This is fueling the need for innovative companies to raise funds especially in the TMT and life sciences sectors."
With the A+H listing of Ant Group expected to be completed within the year, fundraising in the Hong Kong bourse is expected to overtake the full-year record last year and rank among the top exchanges globally by total proceeds at the end of 2020.
About KPMG China
KPMG member firms and its affiliates operating in mainland China, Hong Kong and Macau are collectively referred to as "KPMG China". KPMG China is based in 26 offices across 24 cities with around 12,000 partners and staff in Beijing, Changsha, Chengdu, Chongqing, Foshan, Fuzhou, Guangzhou, Haikou, Hangzhou, Jinan, Nanjing, Ningbo, Qingdao, Shanghai, Shenyang, Shenzhen, Suzhou, Tianjin, Wuhan, Xiamen, Xi'an, Zhengzhou, Hong Kong SAR and Macau SAR. Working collaboratively across all these offices, KPMG China can deploy experienced professionals efficiently, wherever our client is located.
KPMG is a global network of professional services firms providing Audit, Tax and Advisory services. We operate in 147 countries and territories and have more than 219,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such. In 1992, KPMG became the first international accounting network to be granted a joint venture licence in mainland China. KPMG was also the first among the Big Four in mainland China to convert from a joint venture to a special general partnership, as of 1 August 2012. Additionally, the Hong Kong firm can trace its origins to 1945. This early commitment to this market, together with an unwavering focus on quality, has been the foundation for accumulated industry experience, and is reflected in KPMG's appointment for multidisciplinary services (including audit, tax and advisory) by some of China's most prestigious companies.