The total amount of IPOs on mainland exchanges so far in 2022 has reached $57.8 billion, which is the highest amount ever for this time.
This year, massive initial share sales have almost stopped in all of the main financial hubs throughout the world, from London to Hong Kong. But a lot is going on in the Chinese market.
According to data collated by Bloomberg, initial public offerings on mainland marketplaces have increased to $57.8 billion thus far in 2022, the highest amount ever for such a period. Since January, there have been five IPOs for more than $1 billion, and a sixth is imminent.
In contrast, there was only one such sale in each New York, Hong Kong, and London.
With large stock fundraising virtually nonexistent abroad, China’s IPO market has resisted challenges like rising interest rates and worries about a US recession. The Asian economy, whose monetary policy differs from that of the Federal Reserve, targets mostly local investors with its offerings.
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According to some market observers, the increase in listings is partly motivated by worries that the economy may go worse later this year as Beijing adheres strictly to the Covid Zero strategy because of a resurgence in virus infections. Top officials have indicated an easing of the official 5.5 percent growth objective for this year, dampening hope for a recovery.
“Companies have a stronger willingness for IPO because they see the first half as a better time window to get listed than the time ahead,” said Shen Meng, a director at investment bank Chanson & Co. “They have a weaker outlook for the market and worry that factors including earnings uncertainty could make a listing in the future harder than now.”
According to data published by Bloomberg, China’s share of worldwide IPO proceeds has more than tripled to 44% this year from 13% at the end of 2021 as a result of companies rushing to list.
Newly traded stocks’ improved performance has also attracted listing aspirants. Compared to the 13 percent decline experienced in Hong Kong, shares of mainland IPOs are up on average 43 percent over their listing price this year.
While this is happening, investors have been forced to deal with strict Covid curbs, a worsening real estate crisis, and a continued crackdown on internet giants. As a result, China’s benchmark CSI 300 Index has dropped about 16 percent since December 31, making it one of the worst performers among major global equity gauges.
Undoubtedly, the fact that local regulations place a cap on valuation during the IPO contributes to the new share sales’ good performance. This usually results in some profits being left on the table for the new players; flops do occur, but they are uncommon.
Many of the deals that increased the total in China have political implications. The two biggest debuts of 2022 are energy producer CNOOC Ltd. and telecom operator China Mobile Ltd., both of which were deported from the US after being named on a blacklist under Donald Trump. They each raised $5 billion and $8.6 billion in China, and they are currently trading significantly higher than their listing prices.
“The Chinese market is distinct from the rest of the global market. These patriotic transactions are distinctive among Chinese investors, according to Ke Yan, the head of research at DZT Research in Singapore. “Buying stocks that support China’s efforts to reject US transactions and increase its independence from the rest of the world is normal.”
However, in terms of new share sales in China, the tech industry has been one of the busiest.
Demand for Hygon Information Technology Co.’s 10.8 billion yuan ($1.6 billion) initial public offering (IPO) outpaced the amount being offered by 2,000 times.
On August 3, just as US House Speaker Nancy Pelosi’s trip to Taiwan shook the world markets, order-taking started.
A processor manufacturer, a digital storage product manufacturer, and a semiconductor manufacturer all reported growth. Their combined IPOs brought about $1.1 billion.
A lot of the stocks now coming to market in China “are from the tech sector, that investors seem eager to buy given the focus on building up home-grown capabilities,” said Brian Freitas, an analyst for independent research platform Smartkarma in Auckland.
