A-share IPOs fore­cast to pick up

China Daily - - BUSINESS - Jiangx­ue­qing@chi­nadaily.com.cn

Ini­tial pub­lic of­fer­ings on the Chi­nese main­land’s A-share mar­ket are ex­pected to sta­bi­lize and re­cover in the sec­ond half of 2019, ac­cord­ing to PwC fore­casts.

“We pre­dict the A-share mar­ket will re­main in a cau­tious mood dur­ing the first half of 2019, but will sta­bi­lize and re­cover in the sec­ond half due to mar­ginal im­prove­ments in bear­ish sit­u­a­tions,” said Frank Lyn, mar­kets leader of PwC for the Chi­nese main­land and Hong Kong.

The pro­fes­sional ser­vices firm es­ti­mated there will be 130 to 150 A-share IPOs this year, with to­tal deal sizes reach­ing 100 bil­lion to 120 bil­lion yuan ($14.6 bil­lion to $17.5 bil­lion).

A-share IPOs slowed sig­nif­i­cantly in 2018, caused in part by the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion’s stricter re­view process, as well as an eco­nomic growth slow­down, mar­ket volatil­ity and on­go­ing geopo­lit­i­cal uncer­tainty, ac­cord­ing to PwC, which pro­vides au­dit and as­sur­ance, tax and con­sult­ing ser­vices.

The num­ber of IPOs on the Shang­hai and Shen­zhen stock mar­kets fell to 105 in 2018, com­pared with 436 in 2017, hit­ting a five-year low. The amount of funds raised dropped to 138.6 bil­lion yuan last year, down by 40 per­cent year-on-year.

“The just-con­cluded Cen­tral Eco­nomic Work Con­fer­ence set the di­rec­tion for the A-share mar­ket devel­op­ment in 2019. Con­tin­u­ous proac­tive fis­cal pol­icy and pru­dent mon­e­tary pol­icy, cut­ting taxes and ad­min­is­tra­tive fees on a larger scale, and other pri­or­i­ties are of great sig­nif­i­cance in boost­ing in­vestors’ con­fi­dence, guid­ing mar­ket ex­pec­ta­tions, and pro­mot­ing the sta­bi­liza­tion and re­cov­ery of A shares,” Lyn said on Wed­nes­day.

The con­fer­ence has also un­prece­dent­edly im­proved the cap­i­tal mar­ket’s po­si­tion by putting for­ward var­i­ous pro­pos­als, such as in­creas­ing the pro­por­tion of di­rect fi­nanc­ing, which in­di­cates the po­ten­tial of China’s cap­i­tal mar­kets in the fu­ture and the space for re­form, he added.

China has taken a num­ber of mea­sures to fur­ther open up its cap­i­tal mar­kets to for­eign in­vestors, aim­ing to ben­e­fit the mar­kets in the long run.

On this ba­sis, the high­light of the coun­try’s IPO mar­ket in 2019 will be the es­tab­lish­ment of a science and tech­nol­ogy in­no­va­tion board at the Shang­hai Stock Ex­change, Lyn said.

Pres­i­dent Xi Jin­ping an­nounced China’s de­ci­sion to launch the new board and ex­per­i­ment with a regis­tra­tion sys­tem for listed com­pa­nies at the open­ing cer­e­mony of the first China In­ter­na­tional Im­port Expo in Shang­hai on Nov 5.

In order to at­tract do­mes­tic and for­eign in­di­vid­ual and in­sti­tu­tional in­vest­ments in ex­cel­lent in­no­va­tive com­pa­nies, Lyn sug­gested the reg­u­la­tory au­thor­i­ties could al­low new IPO ap­pli­cants to adopt weighted vot­ing rights struc­tures, called du­al­class shares, and to list in both the Chi­nese main­land and in Hong Kong, in ad­di­tion to low­er­ing the min­i­mum profit re­quire­ments for those ap­pli­cants.

At a news con­fer­ence re­leas­ing EY’s an­nual IPO re­port on Dec 27, Jane Yang, EY China govern­ment and pub­lic ser­vice mar­ket seg­ment leader, said the science and tech­nol­ogy in­no­va­tion board will be launched in the first half of 2019 at the ear­li­est, and the reg­u­la­tor will im­ple­ment a new IPO sys­tem.

She said she ex­pects com­pa­nies fo­cus­ing on in­tel­li­gent man­u­fac­tur­ing, ad­vanced tech­nolo­gies and new ma­te­ri­als will be­come the main driver of new list­ings on the new board.

As China has ramped up sup­port for the new econ­omy in the A-share mar­ket through pol­icy re­forms, uni­corn com­pa­nies have al­ready ac­cel­er­ated their IPO plans, Yang added.

Last year, the tech­nol­ogy, me­dia and telecom­mu­ni­ca­tions (TMT) in­dus­try beat all other sec­tors in the A-share mar­ket in terms of funds raised.

“With the ben­e­fits from the con­sis­tent na­tional poli­cies in sup­port of the cap­i­tal mar­ket serv­ing the real econ­omy (the part of the econ­omy that is con­cerned with ac­tu­ally pro­duc­ing goods and ser­vices), the launch of the Sci-Tech In­no­va­tion Board and pi­lot regis­tra­tion sys­tem, and other fac­tors, are ex­pected to boost A-share IPO ac­tiv­i­ties in 2019,” said Ter­ence Ho, EY China IPO leader.

TMT, ma­te­ri­als and in­dus­tri­als were the top three in­dus­tries in the A-share IPO pipe­line in terms of the num­ber of com­pa­nies, ac­cord­ing to Ho. reg­is­tra­tionbased


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