In China, the number of initial public offering (IPO) applications surged in June this year, and the number of IPO candidate companies almost doubled at a stretch to nearly 1,000, the highest level in three years. While equity and capital markets are slowing in many parts of the world, China may become a highly profitable place for bunkers.
Bankers say that one of the reasons for the increase in IPO applications was that the lockdown (city blockade) that had been implemented as a countermeasure against the new coronavirus infection was eased in June.
In order to avoid delays in the procedure due to the pressure of the authorities to submit new financial information, there have been a series of rush applications by the end of June.
One Chinese banker explained that the financial statements required for IPO application are valid for half a year, so there is a tendency for rush applications to occur by the end of June and the end of December, which can be covered by the results of the first half and the second half.
He added that the lockdown in Shanghai ended on June 1st, and "many IPO plans have been stalled by the spread of the new coronavirus."
China's IPO market is already the largest in the world in terms of funding in the first half of this year, but as IPO candidates are on the horizon, it will be able to remain strong in the second half of the year. In the first half of the year, the largest amount of funding in the world was from the Shanghai Stock Exchange Star Market.
As a large-scale project, Swiss pesticide giant Syngenta plans to go public on the stock exchange board by the end of the year and raise $ 10 billion. If realized, it will be the largest IPO in China this year.
In addition, Shanghai Union Medical Technology will sell $ 1.9 billion in shares, and Magby, an artificial intelligence (AI) technology that has been sanctioned by the US government, is aiming to raise $ 1 billion. Both companies are scheduled to be listed on the Shanghai Stock Exchange and are currently in the final stages of the examination.
Investors are also looking to see if the IPO of Ant Group, the financial subsidiary of Alibaba, the largest e-commerce company, will revive. The listing of Ant was postponed just before November 2020. However, officials have told Reuters that the Communist Party leadership has given tentative permission to Ant's plans.
According to official statistics, the number of IPO applications received by the Chinese authorities reached 444 in June alone, and the total number of applications reached 933.
In China, the Chinese Stock Exchange, the Shenzhen Stock Exchange's founding board (China next), and the Beijing Stock Exchange have adopted the US-style IPO procedure, and the total number of applications has increased by 31% year-on-year.
Ernst & Young (EY) partner Felix Fay said the Chinese economy picked up later this year as Shanghai and Beijing's infection control regulations were relaxed and the central government launched stimulus measures. He said it would be a tailwind for the IPO market.
According to KPMG's analysis, China's IPO candidates are focused on innovative and strategic sectors such as manufacturing, technology, media and communications (TMT), healthcare, and energy.
KPMG China's capital markets partner, Luis Lau, pointed out that the resilience of the Chinese economy "creates a favorable environment for financing and is expected to expand IPO reforms in China.".
KPMG data show that IPOs in Shanghai and Shenzhen earlier this year totaled $ 46.3 billion, accounting for about half of the world's total funding.
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