China IPO applications jump, bucking global trend, as COVID curbs ease

[July 07, 2022]  By Samuel Shen and Scott Murdoch

SHANGHAI/HONG KONG (Reuters) - A spike in listing applications from Chinese companies in June has nearly doubled China's IPO candidates to almost 1,000, the highest in at least three years, potentially making the country a bright spot for bankers as equity offerings slow in other markets.

The rush was partly due to China's easing of COVID curbs last month, bankers say. The IPO hopefuls also scrambled to submit their applications by June 30 to avoid having to refresh them with first-half results and further delay the process.

In IPO applications, "financial data has a life of six months, which is why you typically see a rush ahead of June 30, and Dec 31," said a Chinese banker, who declined to be identified as he was not authorised to talk to the media.

"In addition, many projects were hampered by the COVID outbreaks previously," he added, referring to the two-month COVID-19 lockdown of Shanghai that ended on June 1.

In Hong Kong, the $1.71 billion listing next week of Tianqi Lithium is a welcome boost for the city's flagging capital markets but is not expected to be a trigger for more deals as global financial markets remain volatile.

"It's a secondary listing in a hot sector like batteries. We will need to see more activity before we can declare the IPO market is back," one banker working on the deal who could not be identified told Reuters.

The strong pipeline in China means the country's IPO market, the world's biggest by fundraising in the first half, will keep humming in the second half. Shanghai's STAR Market was the top bourse in terms of IPO volume globally in the first half of this year.

Among large upcoming IPOs in China, Swiss agrochemicals group Syngenta is widely expected to list on STAR Market by year end, raising an estimated $10 billion in what could be China's biggest float this year.

Others include Shanghai United Imaging Healthcare Co's planned $1.9 billion share sale, and an estimated $1 billion listing by U.S.-blacklisted artificial intelligence (AI) company Megvii, according to exchange filings.

A sign for STAR Market, China's new Nasdaq-style tech board, is seen after the listing ceremony of the first batch of companies at Shanghai Stock Exchange (SSE) in Shanghai, China July 22, 2019. REUTERS/Stringer

Both will list on STAR, and are in the late stage of the vetting process.

Investors are also monitoring a potential IPO revival by Jack Ma's Ant Group, which sources told Reuters has received tentative green light from China's central leadership. [L1N2XW1T5]

IPO MARKET BOOST

Chinese regulators and stock exchanges accepted 444 listing applications in June alone, bringing the total number of IPO hopefuls in the pipeline to 933, according to official data.

STAR Market, Shenzhen's ChiNext and the Beijing Stock Exchange - China's three market places that have adopted the U.S.-style registration IPO system - witnessed a 31% jump in combined listing applications compared with the same period last year.

With Shanghai and Beijing easing COVID restrictions, and the central government rolling out economic stimulus, "I expect China's economy to rebound in the second half, giving a boost to the IPO market," said Felix Fei, partner at accountancy EY.

China's IPO pipelines are heavily concentrated in innovative and strategic sectors such as industrial manufacturing, TMT, healthcare and energy, according to an analysis by KPMG.

Louis Lau, Partner Capital Markets KPMG China, said possible domestic economic recovery will "create a favourable environment for fund-raising", which may also benefit from an expected expansion of IPO reform in China.

In the first half, IPO volume in Shanghai and Shenzhen totalled $46.3 billion, accounting for roughly half of global IPO proceeds, with COVID, economic uncertainty, and rising geopolitical tensions impacting equity deals, according to KPMG.

(Reporting by Samuel Shen and Scott Murdoch; Editing by Sumeet Chatterjee and Kim Coghill)

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