Outlook remains optimistic for China TMT listings in H1 2023 review

Regulators’ improved policies in the capital market further boost investor confidence

Initial public offerings (IPOs) in China’s technology, media, and telecommunications (TMT) sector remain in a robust and optimistic trajectory for the first half of 2023, despite its decline compared to the same period in 2022.

PwC China reported that the number of Mainland China TMT IPOs fell to 66 in the first half of 2023 from 124 in the second half of 2022. Total financing decreased from $18.5b (RMB133.5b) in the second half of 2022, to $11.4b (RMB82.9b) in the first half of 2023.

Despite the drop, figures this year seemed to be in an upward trend as both listings and the value of funds raised picked up in the second quarter, driven by the STAR and ChiNext Markets.

TMT Industry experts said China’s capital markets benefited from the implementation of its new registration system in the first half of 2023 which has further improved the efficiency of reviewing issuances and the predictability of listings. The role of financial institutions as gatekeepers in the capital markets has also been strengthened and emphasised, and a multi-tiered capital market is now emerging.

The China Securities Regulatory Commission has issued several policies relating to capital markets which “reflects a determination to revive the A-share market and boost investor confidence,” says Jianbin Gao, PwC Mainland China TMT Industry Leader.

“Looking ahead to 2024, we believe that further policies will guide the long-term development of this market. As the Chinese economy recovers, innovative technology companies will gradually usher in new development opportunities,” he added.

The Hong Kong Stock Exchange (HKEX) in March 2023 also released consultation conclusions on the listing system for specialised technology companies, deciding to include Chapter 18C in the Main Board Listing Rules.

PwC Mainland China Media Leader Frank Cai said this further lowers the listing threshold for specialised technology companies that are still in the initial stage of commercialisation or have not yet completed commercialisation and demonstrates the determination of HKEX to attract technology companies to go public on the Hong Kong capital market.

H1 2023 Review

Photo from PwC

In the first half of 2023, the domestic capital market remained the main listing destination for Mainland TMT enterprises, with 39% and 20% of businesses going public on the STAR and ChiNext Markets, respectively.

The 26 TMT IPOs on the STAR Market secured $8.4b (RMB60.6b) in financing, accounting for 74% of the total over the period, while 13 TMT IPOs were on the Shenzhen ChiNext Market, which raised $1.9b (RMB14.2b), or 17% of total financing.

Another nine companies listed on the Beijing Stock Exchange and raised an estimated $167m (RMB1.2b), or 1% of the total. Two companies on China’s Main Board secured around $389m (RMB2.8b) combined, constituting 3% of total financing.

Altogether, 16 Mainland TMT companies opted to list in Hong Kong or overseas markets, securing financing in the region of $566m (RMB4.1b), reflecting 5% of the total capital raised.

Of the total IPOs in the first half of 2023, 42 IPOs (64%) were in the technology hardware and equipment industry; 20 IPOs (30%) were in software and services; and 4 IPOs (6%) were from the media sector. The first category raised the most revenue.

As of 30 June 2023, the total market capitalisation of the 230 TMT enterprises listed on the STAR Market was $59.4b (RMB429.9b), with an average financing of $258m (RMB1.8b).

Since the first batch of listings on the ChiNext Market in 2020, 464 companies have raised $63.3b (RMB458b), with an average financing of $136m (RMB987m).

Over this period, 33 Mainland Chinese companies were listed on the Main Board of Hong Kong, raising $2.2b (HKD17.8b).
Meanwhile, the number of Chinese companies going public in the United States also rebounded significantly as the process for Chinese enterprises to list overseas has become more straightforward.

The first half of 2023 saw 19 Mainland Chinese firms listing on the US stock market, bringing total financing of $473m. The total financing for the six TMT enterprises was $299m.

“The continued smooth flow of overseas listing channels will provide more choices and flexibility for mainland TMT companies seeking capital market listings,” the report stated.

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