SINGAPORE – China’s IPO market will continue to grow next year even after a 2020 blockbuster, according to the investment director of a Chinese financial services firm.
It has been a “very exciting” year for China’s domestic stock market, William Ma of Noah Holdings (Hong Kong) told CNBC’s “Squawk Box Asia” on Monday, adding that about $ 75 billion had been raised from about 400 listings.
“In terms of the size and volume of IPOs in China’s domestic market, it has reached … a record high in the last 10 years,” said Ma, the company’s investment director.
This trend seems likely to continue, he said, with “huge demand” from both domestic and institutional investors, while companies in the new economy sector appear to be going public.
People attend the listing ceremony of Shenzhen Longtech Smart Control Co., Ltd and Shanghai Hi-Road Food Technology Co., Ltd at the Shenzhen Stock Exchange on December 2, 2020 in Shenzhen, Guangdong Province of China.
VCG | VCG through Getty Images
China’s global IPO dominance
The stock listings of Chinese companies dominated the ranking in 2020, according to research conducted by EY.
Among the top 10 listings globally, Chinese companies made up half of the list, while occupying the top three. These include the SMIC listing of the Chinese chip maker on the STAR market in Shanghai, as well as the JD.com secondary listing for e-commerce in Hong Kong. No Asia-Pacific company outside of China has managed to break the top 10.
However, there was also a notable exception among Chinese firms – the financial technology giant and Alibaba-affiliated Ant Group. The most anticipated dual list of the company in Shanghai and Hong Kong would be the largest initial public list in the world. But the IPO was abruptly suspended in November as the company faces regulatory scrutiny.
EY’s Asia-Pacific IPO leader Ringo Choi told CNBC that the strength of listed Chinese companies demonstrates the importance of the continent’s economy, as well as its ability to affect stock market performance.
“That’s why every market is trying to get those companies or mainland companies to go public there,” Choi said.
However, the potential market revenues for domestic listing are likely to be an attractive proposition for mainland Chinese firms, he said.
EY research has shown that the rate of return for first-day IPOs in 2020 was 187% for the Shanghai Stock Exchange’s Nasdaq-style STAR market, compared to 44% for the Shanghai main board.
In comparison, Snowflake – the largest software IPO and largest non-continental firm to debut publicly this year – rose more than 111% on the first trading day on the New York Stock Exchange in September.