HK & Chinese IPO markets to see stronger momentum in 2H

    Hong Kong is expected to continue as the global top IPO spot in terms of IPO proceeds while Shenzhen and Shanghai are to fall behind of other larger venues such as New York, London and NASDAQ during the first half of the year, according to the National Public Offering Group of professional services organization Deloitte China. 
  Amid uncertainty over the macro-economic and political outlook and tighter oversight on market across the border, the two capital markets, however, are anticipated to be more receptive to IPOs later this year.
  Anticipation over positive outcomes on events such as the referendum on UK's exit of the European Union (Brexit), US Fed's decision over interest rate hike in July, and the imminent launch of the Shenzhen-Hong Kong Stock Connect Programme should help improve sentiment towards IPOs.
  In addition, a large pipeline and favourable listing environment should improve Hong Kong's hope for IPO leadership position for another year.
  Analysis indicates that Hong Kong is to raise about HK$43.5 billion by completing 38 IPOs by the end of June 2016. This represents a drop in both the number of new listings and IPO funds raised by 17% and 66% respectively against the same period of 2015.
  During the first six months, the market spotlight was on the share flotations from large Chinese financial services institutions which accounted for more than 70% of the market's total IPO proceeds.
  At the same time, 55 IPOs from Shenzhen and Shanghai altogether are to raise proceeds totaling RMB26.7 billion (HK$31.8 billion) funds under tight control over IPO debut and prices in an effort to stabilize the A-share stock market. Both figures were significantly weaker than 187 IPOs raising RMB146.1 billion in the first six months of last year, some 71% fewer IPOs and 82% less funds respectively.
  In the ranking of IPO funds raised, Hong Kong is expected to be crowned first supported by three huge IPOs from Chinese financial institutions. New York is to trail well behind with far fewer IPOs while London is to take the third position with a small gap with the former. The smaller average offering scale is to place NASDAQ in the fourth place.
  With a clearer market outlook providing a more stable listing window, seven to eight listings are likely to commence their offering plans. Most of these firms will require funds to expand cross-border brokerage and securities businesses in order to sharpen their competitiveness. The plan of transforming the environmental conservation industry into a Chinese pillar sector should encourage its companies in that sector to seek funds in Hong Kong. Health care and pharmaceutical companies should also look for IPO opportunities in Hong Kong as well on the back of the ongoing China medical sector reform.
  In light of this, Deloitte forecasts Hong Kong to have about 115 IPOs raising HK$200 billion for the full year of 2016.
  Nevertheless, following MSCI's third decline of including the A-share into its index, reform measures in areas such as for capital outflows and market connectivity program like the Shenzhen-Hong Kong Stock Connect will take stage.
  But Anthony Wu, Leader of China A-Share Capital Market of the National Public Offering
Group, Deloitte China, said an acceleration in IPO debut is expected once the existing macro-economic and political uncertainty is lifted. Many of these IPOs will continue to come from manufacturing and technology companies and be small and medium in their scale. Based on these trends, Deloitte forecasts about 180-220 IPOs raising RMB86-106 billion in the A-share market by the end of 2016.