More than 200 companies to go public: Report
More than 200 Chinese mainland companies are due to make their debut on the A- share market next year after the authorities resumed initial public offering activity in the equity market, predicted Deloitte Touche Tohmatsu, one of the “big four” accountancy firms.
These companies are expected to raise more than 170 billion yuan ($27 billion) in 2014, Deloitte said at a news conference on Monday to launch its report on the IPO outlook for 2014.
Deloitte, which, like the other three big firms, has been active in IPO services, estimated in the report that up to 230 mainland companies, which are already under listing review by the China Securities Regulatory Commission, will be able to complete their listings next year on the mainland equity market. The commission has said that the 12- month moratorium on IPOs will be lifted by the end of January 2014.
In 2012, a combined 103.4 billion yuan was raised by 154 new listings in the A-share market. According to Deloitte’s estimates, 2014 is on track to witness a surge in both the number of IPOs by 49.4 percent and the amount of funds raised will rise 64.4 percent from 2012.
The report said that 83 companies that have passed the commissiion’s review are set to raise as much as 55 billion yuan. Among them, more than 50 companies are in technology, media, telecoms and machinery manufacturing.
That echoes the estimates of Ernst & Young, another of the big four, earlier in December. The accounting firm sees industrials, technology, media, telecoms and non-high-end consumption products among the top listing sectors for the mainland capital market in 2014. Statesupported industries such as those related to environment protection and services businesses, as well as companies integrating high-tech and traditional enterprises — such as online payment settlement and mobile services — are expected to be winners in the IPO rush next year.
In addition, small caps will dominate the IPO market. The majority of the 83 firms ready for listing — approximately 65 companies — are expected to stage IPOs smaller than 500 million yuan each, said the Deloitte report. Most of the listings will concentrate on the growth enterprise market and the small and medium enterprise board.
Just two sizable deals are on the horizon. Shaanxi Coal Industry Co Ltd, 71 percent owned by Shaanxi Coal and raised by 154 new listings in the A-share market in 2012 Chemical Industrial Group, is hoping to make 17.25 billion yuan from a listing, while the express service branch of China Post, EMS, is anticipated to attract 9.98 billion yuan next year.
Meanwhile, 51 companies are expected to complete IPOs in the first quarter, among which one-third are in the machinery manufacturing, technology, media, telecoms and green energy sectors.
“The 51 companies’ halfyear financial reports are still valid according to the commission’s requirement that only data within seven months could be used as listing material,” said Edward Au, co-head of the national public offering group with Deloitte. “However, if they failed to finish the IPOs in January, they will have to renew the reports.”
Au said that because the Chinese Lunar New Year is at the end of January, whether all the 51 firms can complete their IPOs depends on market sentiment. “Investors might lack an appetite for IPOs before the festival. If they fail to list by the end of next month, they will have to resubmit the data in March or April and there will be only nine months left next year for more listings,” he added.
“Given the current market sentiment, it will take at least two years for the A-share market to absorb the 673 companies lined up for IPOs,” he said. “Because the reform unfolding on the mainland will add pressure to liquidity in the capital market and the commission has changed the rules to make it easier to list, we anticipate the A-share market to fluctuate dramatically next year.”
“In addition, the growth enterprise market demands at least 30 percent annual growth in the year before listing. Because the growth rate of the Chinese economy is slowing down, some companies may fail to meet the necessary criteria,” Au added.
The Hong Kong stock market is expecting a better year in 2014 because up to five heavyweight IPOs are expected to push the market to a new high, said the Deloitte report. Having raised HK$166 billion this year in IPOs, Hong Kong is the second- largest IPO destination worldwide coming behind the New York Stock Exchange in terms of proceeds value.
“We believe the IPO window in Hong Kong would enable the IPO market to raise up to HK$210 billion from 85 to 100 listings next year,” said Au.