China has taken the international lead in IPO’s this year with a record number of A-share listings.
A new report from Ernst & Young on the global IPO market indicates that IPO activity in 2017 surged to its highest level in a over decade.
2017 saw a total of 1624 IPO’s internationally that raised roughly USD$188 billion, with the transaction volume and funds raised for global IPO’s posting year-on-year growth of 49% and 40% respectively.
While these levels still fall short of 2017, when a total of 1974 IPO’s raised roughly USD$338.4 billion, the surge in activity signifies a recovery of the international market and could portend greater transaction volumes in 2018.
According to the report the greater China region has taken the lead in this IPO resurgence, with a total of 436 A-share listings on the Shenzhen and Shanghai exchanges raising 230.4 billion yuan, for year-on-year increases of 92% and 53% respectively.
Average returns for new shares have declined, however, with a fall of 16% for the Shanghai main board, 41% for Shenzhen’s SME board and 33% for ChiNext.
“Driven by the listing of small and medium-sized enterprises, the IPO volume has hit an unprecedented high,” said Ernst & Young’s Yang Shujuan (杨淑娟) to Securities Daily.
“In 2017 the number of new A-share listings broke through the 400 threshold for the first time, exceeding the prior historic high of 347 in 2010.
“However, because there were no large-scale stocks that raised more than 5 billion yuan this year, and most of the listings were for small and medium-sized enterprises that raised less than 1 billion yuan, the amount of funds raised in 2017 was only 47% that in 2010.”
An increasing number of Chinese enterprises are also turning to the United States for their IPO’s, especially as giants such as Alibaba and Baidu see their share prices rise to record heights.
Looking forward to 2018, Ernst & Young expects China’s A-share listings to maintain their momentum, with regulators focusing on the three key missions of servicing the real economy, risk prevention and advancing reform.
“Following the integration of the approval and review commissions and a tightening of IPO inspections, in 2018 the quality of listed enterprises will further increase, which will be of benefit to the healthy development of China’s capital markets,” said Yang Shujuan.
“In addition to this regulators will continue to steadily advance capital market reforms, and improve existing systems in a number of areas, including market withdrawal systems, improvements to the new three board system and the differentiated issuance system.
“The optimisation of interconnections as well as the inclusion of A-shares in the MSCI emerging markets index will also help to drive the internationalisation of Chinese A-shares.”