Stricter management to cut IPOs in 2018, PwC predicts

Strict government management on the stock market will cause IPO numbers to fall in 2018 compared with 2017, consulting firm PwC China noted in a statement on Tuesday.

PwC forecast that there will be about 300 to 350 IPOs on the Chinese mainland stock market in 2018, compared with 437 IPOs in the past year.

The statement also noted 2018 will witness about 200 billion yuan ($30.8 billion) raised for new listings, down from 235 billion yuan raised in 2017.

According to the company, the new domestic IPO review committee’s stricter rules for IPO approvals will cause a slowdown in the issue of new A shares in 2018, and companies preparing for IPOs will have more incentive to “reappraise their future.”

Data revealed in a report of Time Weekly on Tuesday showed that the rate of IPO approval in Chinese mailand reached 77.87 percent in 2017, down from 91.14 percent in 2016.

The statement also noted that regulators are expected to continue to facilitate a range of system reforms, including the delisting system, to reverse an “unhealthy speculative psychology” as well as problematic trends in the current market environment.

Shen Jie, an accounting advisory services partner at PwC China, said that the stricter management environment in the mainland might cause domestic companies to consider the option of getting listed on the Hong Kong bourse.

“Of course they can’t immediately turn from onshore to offshore markets, but at least there is the possibility that the Hong Kong bourse will be their choice in the future,” she said.

PwC predicted that there will be about 150 IPOs on the Hong Kong bourse in 2018, slightly down from 174 IPOs in 2017. But it stressed that this year the funds raised on the Hong Kong bourse will likely be double the amount in 2017.

Eddie Wong, partner of capital markets services at PwC Hong Kong, said that the chances of domestic companies, especially high-tech companies, of seeking IPOs in Hong Kong are increasing, particularly as dual-class shareholding companies will be shortly allowed to get listed in Hong Kong.

Reuters reported that domestic smartphone maker Xiaomi Inc will seek an IPO in Hong Kong in 2018. Xiaomi had “no comment” when contacted by the Global Times on Tuesday.