Firm lowers IPO forecast
About 150 new listings expected in A-share market: PwC
About 150 firms are expected to get listed on China's A-share market this year, half of the number previously projected given a slow pace in IPO approvals, accounting firm PricewaterhouseCoopers (PwC) said in its latest report released on Wednesday.
“We have lowered the forecast on the number of new listings… given the IPO market in the first half of this year is not that active,” Frank Lyn, a finance leader at PwC China, told at a press briefing on Wednesday.
China saw 52 new listings in the A-share market in the first half of this year, including seven on the Shanghai Stock Exchange and the rest on the Shenzhen Stock Exchange featuring small-cap stocks, according to PwC.
In an earlier forecast released in January, PwC projected 300 IPOs for 2014.
“But we are still quite optimistic about China's economy,” he said.
PwC's latest projection on full-year new offerings is aligned with the target range recently disclosed by the stock regulator.
About 100 IPOs will float on the country's A-share market in the second half of the year, Xiao Gang, chairman of the China Securities Regulatory Commission (CSRC), said in May.
By the end of June, a total of 2,520 companies have been listed on China's A-share market.
The IPO proceeds for the second half of the year might not even exceed 100 billion yuan, as small and medium-sized companies will account for majority of the new listings, another accounting firm Ernst & Young said in a note sent to the Global Times on Tuesday.
The CSRC had frozen the new offerings since the fourth quarter of 2012 and gave no IPO approval in 2013 at all, soon after it announced reforms aimed at redressing the current IPO system where new listings based on administrative reviews and approvals were often overpriced, and underperformed following a first-day pop.
A 14-month IPO hiatus left a backlog of more than 600 cash-starved companies waiting in line for listing approval.
The stock regulator restarted the IPO endorsement in January this year but halted it shortly afterward. The new offerings came after the CSRC said in early June that it had given green light to the IPOs which had been dormant since February.
Capital raised from the new offerings in the first six months amounted to 35.2 billion yuan ($5.72 billion) in the A-share market, adding to a total of 100.4 billion yuan raised from all IPOs in China including those floated in Hong Kong's H-share market, according to PwC.
Internationally, the US stock market consisting the technology-savvy NASDAQ and the New York Stock Exchange (NYSE) ranked top in terms of IPO proceeds, equaling to 200.9 billion yuan in the first half of this year, followed by the London Stock Exchange.
IPO proceeds from the NYSE are expected to further rise in the second half of the year, with upcoming launch of one or two juggernaut IPOs, PwC's Lyn said.
China's e-commerce firm Alibaba Group has recently confirmed to launch its IPO on the NYSE, which could be the largest IPO ever with fundraising expected to be around $15 billion.
Jd.com, another Chinese e-commerce company, already pooled about $1.78 billion from its IPO on the NASDAQ in May.
Many of China's high growth technology firms choose to float overseas rather than on the Chinese mainland's A-share market because of the current IPO requirements, such as three consecutive years of profitability, are way too high for such firms, Dong Dengxin, director of the Finance and Securities Institute at the Wuhan University of Science and Technology, told the Global Times on Tuesday.
To attract such firms, the Securities Law needs to be amended in order to change the IPO standards, leading to the establishment of a registration-based market system similar to that adopted in the US, where market reception dictates how IPOs are priced, when companies get listed and how their shares perform.
Also, the Criminal Law needs to incorporate heavy penalties for those who forge financial results and mislead stock investors, so as to ensure a true, reliable and timely information disclosure, he said.
The CSRC said on Friday that it will unveil the detailed plans for the registration–based IPO system reform by the end of this year.