Greater China IPO Watch 2016 - PwC · Greater China IPO Watch 2016 1 The Hong Kong stock market consists of two separate boards: the Main Board (MB) and the Growth Enterprise Market

Greater China IPO Watch surveys stock market listings in Greater China and provides a comparison with the world’s major markets

Greater China IPO Watch 2016

Greater China IPO Watch 2016 1

The Hong Kong stock market consists of two separate boards: the Main Board (MB) and the Growth Enterprise Market (GEM). The MB facilitates fund raising by companies with track records of certain minimum profit, revenue, operating cash flow and/or market capitalisation levels as set out in the Hong Kong listing rules. The GEM focuses on companies which do not fulfil the profitability/track record requirements of the Main Board but have growth potential and a minimum level of positive operating cash flow. Companies established in mainland China (the People’s Republic of China) that are listed in Hong Kong are referred to as H-share companies. Companies owned by mainland China nationals or enterprises which are listed in Hong Kong through Hong Kong or overseas incorporated holding companies are referred to as Red Chip companies.

Both the Shanghai and Shenzhen Stock Exchanges consist of A-share and B-share listing platforms on which companies established in mainland China can list. The Shenzhen Stock Exchange has a Small and Medium Enterprise (SME) Board and a ChiNext Board to facilitate fund-raising of small and medium-sized enterprises and growing venture enterprises. Shanghai and Shenzhen A-share, and shares listed on SME and ChiNext can only be traded by mainland China nationals and enterprises, while B-share can only be traded by overseas investors.

National Equities Exchange and Quotation system in mainland China, which serves as a national share transfer system for SMEs to transfer shares and raise funds, is not covered within this review.

The Taiwan Stock Exchange (TSEC) facilitates capital raising by companies (both Taiwan and foreign companies) with track records of certain minimum profit and capital base. Technology-based companies without track records but with a certain minimum amount of paid-in capital and projected net worth can also be listed. Most of the companies in Taiwan have to list their shares for a minimum of six months on the over-the-counter market, Emerging Stock on the Gretai Securities Market (GTSM) before listing on TSEC. This review does not include data from the GTSM.

This Greater China IPO Watch provides an overview of the initial public offerings (IPOs) and listing activities on Greater China’s principal stock markets, including Hong Kong, Shanghai, Shenzhen and Taiwan. The analysis covers companies which were listed on these markets from 1 January to 31 December 2016. For comparability purposes, all figures in this report have been translated into United States Dollars (USD) at the applicable closing exchange rate at the end of each year.

Initial public offering in this publication is defined to include all share listings on a platform where the entity’s shares have not been listed previously.

This report has been prepared by the China/Hong Kong Capital Market Services practice of PwC.

Introduction to the four stock markets

Contents

4 Foreword

6 Overview of the IPO markets in Greater China

7 IPOs by stock exchange

8 IPO vs. other equity fund raising

9 IPOs by P/E multiples

10 IPOs by share price performance on the first day of listing

12 IPOs by industry sector

13 Turnover value and market capitalisation

14 Top ten IPOs in Greater China from 2012 to 2016

15 Top ten IPOs in world history and top ten IPOs worldwide in 2016

16 Comparison with the US markets

17 Comparison with the European markets

18 Comparison with major Asian markets

19 Debt issued in mainland China and Hong Kong

4 Greater China IPO Watch 2016

As a result of global instability and the suspension and resumption of IPOs in 2015, the mainland China IPO markets were in a recovery phase in the first half of 2016, resulting in a moderate increase in terms of IPO volumes. Overall market performance was stable in the second half of 2016. An accelerated IPO approval process is expected to continue this momentum.

The Hong Kong Stock Exchange is expected to remain popular with mainland enterprises as it has a proven platform to raise funds and is highly transparent, supported by a good track record, and is well regulated.

The long term fundamentals in the region remain positive with GDP growth and urbanisation forecast to continue, the region’s capital markets are expected to strengthen in 2017, following a period of regulatory reform and a continued clear pro-growth strategy by the leadership in China creating a supportive environment for IPOs.

Foreword

Uncertainty in the global economy in 2016 led to subdued overall fundraising globally, with the impact of Brexit, the US presidential election and rising interest rates creating a less-than-ideal worldwide fundraising climate. As a result, IPO funds raised in the US and Europe decreased 34% and 58% respectively compared to 2015. The Greater China markets proved to be comparatively resilient with only a 20% decrease compared to 2015.

In addition, volatility in the mainland China stock markets and deceleration of China’s economic growth, prompted investors and companies planning to list to adopt a wait-and-see attitude, intensifying the risk-averse sentiment in the market and impacting the investment appetite for and pricing of new listings.

Hong Kong led the world in terms of amount of funds raised, showing the robust position of the territory’s financial markets, with enterprises still viewing it as their first choice of fundraising platform in Asia and even worldwide.

However, the global investment backdrop remains uncertain with further interest rate rises inevitable in the medium term and geopolitical concerns remaining. This emphases the need for companies to be confident in their chosen strategy and for listing applicants to be IPO ready in order to take advantage of the continued short IPO windows.

Looking forward

Global markets are expected to remain volatile in 2017, with major factors including the economic policies and pace of interest rate hikes of the new US government, how the Brexit plan will be initiated, post-referendum political trends in Italy, and economic recovery and quantitative easing policy in European countries. However, as variables in the macro-economic environment are resolved, and the risk-off sentiment among global investors cools down, the market investment climate is expected to improve gradually.


Kennedy LiuCapital Markets and Accounting Advisory Services LeaderPwC China and Hong Kong

Emerging markets in Asia are expected to continue to grow in 2017, outpacing the US, Europe and other emerging markets, and offering opportunities for investors amid ongoing global political and market volatility.

Market consensus shows that China’s economy will maintain a steady growth, while government measures adopted in mainland China to promote development of the services industry and urbanisation will bring plenty of business opportunities to enterprises in mainland China and Hong Kong, boosting fundraising demand.

In addition, overseas investment by Chinese companies is anticipated to continue, particularly through the acquisition of businesses involved in new technologies, research and development activities and those with well-known brands. This outbound investment and redeployment of capital is expected to sustain the supply of IPO candidates due to business seeking additional funds to deploy and also investors subsequently wishing to divest overseas investments via spin offs.

From the ‘Hong Kong Stock Through Train’ put forward in 2007 to today’s Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connects, there have been years of development and preparation. Stock Connect has made a huge step toward the opening-up of China’s capital market and RMB internationalisation. The launch of Shenzhen-Hong Kong Stock Connect at the end of 2016 will further attract various types of investors. Coupled with more small-and medium-cap growth stocks listed in Shenzhen, including stocks of new economy and high-tech companies with significant potential, this will help the Hong Kong stock market expand its investment base and improve investor sentiment. This will further reinforce Hong Kong’s important role in the multi-level capital markets of mainland China as well as its strategic position as an international fundraising platform with the backing of the mainland.

Investor demand for new issuers from Greater China is anticipated to continue as the long term fundamentals in the region remain relatively attractive compared to other major markets with GDP growth and urbanisation forecast to continue. Inevitable risks remain, however considering both demand and supply side factors, the Greater China IPO markets are expected to continue their growth in 2017.

Overview of the IPO markets in Greater China


The number of IPOs in Greater China decreased marginally from 381 in 2015 to 378 in 2016. The amount of funds raised from IPOs decreased by 20% from USD 58.8 billion in 2015 to USD 47.3 billion in 2016. The Hong Kong Stock Exchange continued to lead the world in terms of funds raised. However, IPO volumes and funds raised reverted to more normal levels after the strong growth shown in 2015.

Number of IPOs from 2012 to 2016

Amount of IPO funds raised from 2012 to 2016

Source: PwC Research

Num

ber

of I

PO

s

Year2012 2013 2014 2016

241

144

268

2015

381378

20162012 2013 2014 2015

Year

US

D b

illio

n

58.8

29.4

22.6

43.447.3

IPOs by stock exchange


In aggregate, deal volumes remained relatively constant across the Greater China markets, with a 9% reduction in deal volumes in Hong Kong being offset by a 16% rise in Shanghai.

The 16% growth in IPO volumes in Shanghai was accompanied by a 12% decrease in funds raised reflecting a reduction in the size of average funds raised per IPO.

Shenzhen showed a 5% decrease in IPO volumes from 130 in 2015 to 124 in 2016 with a 9% decrease in funds raised. The decrease was primarily driven by a 9% reduction in the number of IPOs on the ChiNext Board for SMEs which had a particularly strong year in 2015.

The Hong Kong Main Board hosted 81 IPOs compared to 104 in 2015, with a 27% decrease in IPO funds raised, falling to USD 24.6 billion.

Hong Kong’s GEM Board had another strong year in terms of IPO volumes, attracting 45 new listing applicants in 2016 compared to 34 in 2015. IPO funds raised doubled to USD 0.6 billion.

The Taiwan Stock Exchange hosted 25 IPOs raising USD 0.4 billion, compared to 24 in 2015 which raised USD 0.6 billion.

(Funds raised in USD billion)

Hong Kong Main Board

Hong Kong GEM Shanghai A

Shenzhen SME Board

Shenzhen ChiNext Taiwan Total

2012No. of IPOs 52# 12 26 55 74 22 241

% of total 21.6% 5.0% 10.8% 22.8% 30.7% 9.1% 100.0%Funds raised 11.4 0.2 6.1 5.6 5.7 0.4 29.4

% of total 38.8% 0.7% 20.7% 19.0% 19.4% 1.4% 100.0%

2013No. of IPOs 89*# 23 - - - 32 144

% of total 61.8% 16.0% 0.0% 0.0% 0.0% 22.2% 100.0%Funds raised 21.7 0.4 - - - 0.5 22.6

% of total 96.0% 1.8% 0.0% 0.0% 0.0% 2.2% 100.0%

2014No. of IPOs 103# 19 43 31 51 21 268


% of total 68.4% 0.7% 12.7% 8.3% 8.3% 1.6% 100.0%

2015No. of IPOs 104# 34 89 44 86 24 381


% of total 57.0% 0.5% 28.4% 4.8% 8.3% 1.0% 100.0%

2016No. of IPOs 81# 45 103 46 78 25 378


% of total 52.0% 1.3% 31.1% 7.0% 7.8% 0.8% 100.0%

* included Real Estate Investment Trusts (REITs): 2 in 2013# included listing by introduction & switch from GEM to Main Board without raising funds in Hong Kong: 4 in 2012, 13 in 2013, 13 in 2014, 17 in 2015 and 9 in 2016



IPO vs. other equity fund raisingThe relative proportion of funds raised from IPOs in Greater China versus total equity funds raised decreased slightly from 15% in 2015 to 14% in 2016. This was primarily due to decreases in other equity funds raised in Hong Kong, which decreased by over 65% from USD 109.4 billion in 2015 to USD 37.5 billion in 2016, and in Shanghai, which decreased by over 14% from USD 117.6 billion in 2015 to USD 101.4 billion in 2016, offset by a 53% increase in Shenzhen, which increased from USD 95.5 billion in 2015 to USD 146 billion.

Total equity funds raised from 2012 to 2016

Hong Kong Shanghai Shenzhen Taiwan Greater China total

(Amount in USD billion) Amount % Amount % Amount % Amount % Amount %

2012

IPO funds raised 11.6 30% 6.1 13% 11.3 34% 0.4 15% 29.4 24%

Other equity funds raised 27.7 70% 41.0 87% 21.6 66% 2.3 85% 92.6 76%

Total equity funds raised 39.3 100% 47.1 100% 32.9 100% 2.7 100% 122.0 100%

2013

IPO funds raised 22.1 45% 0.0 0% 0.0 0% 0.5 13% 22.6 18%



2014

IPO funds raised 30.0 25% 5.5 9% 7.2 10% 0.7 21% 43.4 17%



2015

IPO funds raised 33.8 24% 16.7 12% 7.7 7% 0.6 14% 58.8 15%



2016

IPO funds raised 25.2 40% 14.7 13% 7.0 5% 0.4 12% 47.3 14%




US

D b

illio

n

Other equity funds raised

IPO funds raised

2015 20162012 2013 2014

29.4 22.643.4

58.847.3

92.6 100.8

215.1

326.1

287.9


IPOs by P/E multiplesIn 2016, P/E multiples in Greater China for IPOs remained relatively consistent with levels shown in 2015. The percentage of IPOs offered at a P/E multiple of over 20 times was 63% in 2016 compared to 64% in 2015.

P/E multiples in Shanghai reverted to more normal levels, decreasing from 87% of IPOs offered at P/E multiples of above 20 in 2015 to 72% in 2016. P/E multiples in Shenzhen increased from those shown in 2015, with approximately 89% being offered at multiples above 20 reflecting the high growth nature of the listing companies.

P/E multiples in Hong Kong were consistent with 2015, with 36% of IPOs offered at P/E multiples of above 20.

In Taiwan, P/E multiples decreased marginally compared to those seen in 2015 with around a quarter of IPOs with a P/E greater than 15 times.

P/E ratio

P/E ratio by Stock Exchange 2014




0

50

100

150

200

250

Num

ber

of I

PO

s

20162014 2015

N/A100-199.99

50-99.99

30-49.99

20-29.99

15-19.99

10-14.99

5-9.99

<5

8 3

302637 4050

40 43 52 52

93

203 211

287 7 5 6 2 2

19 252018

Num

ber

of I

PO

s

0

10

20

30

40

50

5-9.99

<5

3 5

25

14

25

5 4 6

21

812

2

17

26

48

2 26

3

17

61

19

0

20

40

60

80

100

120

23

1 2

35

1 311

1711

20

4

20

76

106

15

1 25

2

21

41

Num

ber

of I

PO

s

5-9.99

<5

TaiwanShanghai Hong Kong Shenzhen

0

20

40

60

80

100

120

Num

ber

of I

PO

s

5-9.99

<5

12

20

6 9

27

62

5

22 25

74

110

27

2

1556

1710

32

IPOs by share price performance on the first day of listing

Around 94% of new listings in 2016 closed their first day of trading with a price above the IPO issue price indicating continued favourable pricing for IPO investors. In 2016, 12% of IPOs enabled investors to have a first day gain of more than 50% compared to 10% in 2015, including one-third of IPOs in Hong Kong.

Share price performance by year — % change of first day closing price over IPO price



Num

ber

of I

PO

s

3336

46

14 11 13

146

238 241

5 7 124 6 6 2 1 2 7 5 6

17 7 8 9

2 1

17 2113

20162014 2015

0

50

100

150

200

250

3 72

8 5 4

28 27

16


% change of first day closing price over IPO price 2014



Num

ber

of I

PO

s

37

1

27

1

31

2

11

1 1 1

12

42

81

11

4 1 4 26

2

13

40

20

40

60

80

100

Num

ber

of I

PO

s

0

30

60

90

120

150

7 4 1

23

4

32

410

1

12

89

130

7 4 36

15 7 8

2

17

4

Num

ber

of I

PO

s

0

30

60

90

120

150

2 4

15

1

35

11 94

103

124

122

93 6

26 7 9 9

1 4

TaiwanShanghai Hong Kong Shenzhen


IPOs by industry sectorMost of the IPO candidates in Greater China are from the retail, consumer goods and services sector, which represented 45%, 45% and 37% of the total number of IPOs in 2014, 2015 and 2016 respectively.

The relative decrease in the proportion of IPOs from the retail, consumer goods and services sector was offset by an increase in the relative proportion of applicants from the information technology and telecommunications sector, from 8% in 2015 to 13% in 2016, and an increase in the relative proportion of applicants from the industrial sector, from 35% in 2015 to 37% in 2016.

Despite the relative decrease in the number of IPO applicants from the retail, consumer goods and services sector, the relative proportion of funds raised remained at 28%.

The increase in the relative proportion of applicants from the information technology and telecommunications sector was matched with a corresponding increase in the relative proportion of funds raised from 4% in 2015 to 6% in 2016.


In contrast, the increase in the relative proportion of applicants from the industrial sector was accompanied by a decrease in the relative proportion of funds raised from 19% in 2015 to 16% in 2016.

The relative proportion of IPOs from the financial sector in 2016 remained below 10%. However, the relative proportion of IPO funds raised from the financial sector increased from 43% in 2015 to 48% in 2016. This was due to eight of the top ten IPOs in Greater China being from the financial sector, raising a combined USD 16.8 billion.

Number of IPO by industry sector

Funds raised by industry sector

2014 2015 2016

7%7%

15%

26%

45%

5%

7%

8%

35%

45%

4%

9%

13%

37%

37%

Total number of IPOs: 268



2015

4%

2014 2016

21%

22%

8%15%

34%

6%

43%

19%

28%

48%

6%

16%

28%

Energy & utilities Financials Information technology & telecommunications Industrials Retail, consumer goods & services

2%

Total IPO funds raised:USD 43.4 billion

Total IPO funds raised: USD 58.8 billion

Total IPO funds raised: USD 47.3 billion


Turnover value and market capitalisationThe market capitalisation of the Greater China capital markets remained at 2015 levels with a 4% net increase in the number of listed companies.

The turnover value of the Greater China capital markets decreased by 52% in 2016, retreating from the record levels seen in 2015. This was primarily driven by turnover reverting to historical norms in Shanghai (65% decrease) and Shenzhen (41% decrease).

Turnover in the Greater China capital markets for 2016 was 184% of its closing market capitalisation in 2016 (2015: 357%); while it was 65% (2015: 34%) in the United Kingdom and 104% (2015: 120%) in the United States.

Market data as of 31 Dec

(Amount in USD billion)

2014 2015 2016

Stock Exchange

Number of listed

companiesTurnover

valueMarket

capitalisation

Number of listed

companiesTurnover

valueMarket

capitalisation

Number of listed

companiesTurnover

valueMarket

capitalisation

Hong Kong Main Board

1,548 2,190.8 3,209.7 1,644 3,333.3 3,151.3 1,713 2,099.6 3,153.3

Hong Kong GEM Board

204 21.3 23.1 222 32.9 33.3 260 15 40.1

Shanghai A 986 6,045.7 3,917.7 1,073 20,396.6 4,531 1,175 7,155.5 4,083.5

Shanghai B 53 7.8 14 52 36.3 19.2 51 14.2 15.2

Shenzhen A* 1,606 5,902 2,058.3 1,735 18,861 3,624.6 1,859 11,167.6 3,200.1

Shenzhen B 51 8.4 13.7 49 20.7 14.8 49 7.2 12.4

Taiwan 854 692 849.8 874 615.1 746.4 892 518.8 842.9

Total 5,302 14,868 10,086.3 5,649 43,295.9 12,120.6 5,999 20,977.9 11,347.5

* include Shenzhen SME Board and Shenzhen ChiNext



The top ten IPOs in Greater China accounted for 42% of the total funds from IPOs in 2016 (2015: 46%).

Over the last five years, Hong Kong and Shanghai have consistently hosted the largest IPOs in Greater China. The ability of these two markets to absorb large IPOs demonstrates the significant capital pool available in Greater China. In 2016, 10 IPOs each raised over USD 1 billion, compared to 12 in 2015 and 9 in 2014.

Average deal sizes of the top ten IPOs decreased from USD 2.7 billion in 2015 to USD 2 billion in 2016. Hong Kong again led the way for larger IPOs, notably in the financial sector, hosting the IPO of the Postal Savings Bank of China which raised USD 7.6 billion, the largest IPO worldwide during the year.

2012 Company

Funds raised (USD million)

Stock Exchange

The People's Insurance Co (Group) of China Ltd

3,562 Hong Kong

Haitong Securities Co Ltd 1,856 Hong Kong

China Communications Construction Co Ltd 1,170 Shanghai

Inner Mongolia Yitai Coal Co Ltd 904 Hong Kong

Sunshine Oilsands Ltd 579 Hong Kong

China Machinery Engineering Corporation

575 Hong Kong

CITIC Heavy Industries Co Ltd 513 Shanghai

Shanghai Fosun Pharmaceutical (Group) Co Ltd

512 Hong Kong

Guangzhou Automobile Group Co Ltd 419 Shanghai

Huadian Fuxin Energy Corporation Ltd 345 Hong Kong

Total 10,435 (36%)

2013 Company


Stock Exchange

China Everbright Bank Co Ltd 3,205 Hong Kong

China Cinda Asset Management Co Ltd 2,824 Hong Kong

SINOPEC Engineering (Group) Co Ltd 1,798 Hong Kong

China Huishan Dairy Holdings Co Ltd 1,500 Hong Kong

Huishang Bank Corporation Ltd 1,368 Hong Kong

China Galaxy Securities Co Ltd 1,098 Hong Kong

Qinhuangdao Port Co Ltd 562 Hong Kong

Bank of Chongqing Co Ltd 559 Hong Kong

Langham Hospitality Investments and Langham Hospitality Investments Ltd

549 Hong Kong

China Conch Venture Holdings Ltd 533 Hong Kong

Total 13,996 (63%)

2014 Company


Stock Exchange

Dalian Wanda Commercial Properties Co Ltd 4,039 Hong Kong

CGN Power Co Ltd 3,638 Hong Kong

HK Electric Investments Ltd 3,111 Hong Kong

WH Group Ltd 2,360 Hong Kong

BAIC Motor Corporation Ltd 1,532 Hong Kong

Shengjing Bank Co Ltd 1,502 Hong Kong

China CNR Corporation Ltd 1,293 Hong Kong

Harbin Bank Co Ltd 1,131 Hong Kong

Guosen Securities Co Ltd 1,127Shenzhen

SME

Luye Pharma Group Ltd 878 Hong Kong

Total 20,611 (48%)

2015 Company


Stock Exchange

HTSC 5,000 Hong Kong

Guotai Junan Securities Co Ltd 4,633 Shanghai

GF Securities Co Ltd 4,139 Hong Kong

China Huarong Asset Management Co Ltd

2,541 Hong Kong

China Reinsurance (Group) Corporation 2,115 Hong Kong

China National Nuclear Power Co Ltd 2,033 Shanghai

Legend Holdings Corporation 1,975 Hong Kong

China Energy Engineering Corporation Ltd

1,900 Hong Kong

Orient Securities Co Ltd 1,546 Shanghai

China Railway Signal & Communication Corporation Ltd

1,455 Hong Kong

Total 27,337 (46%)


Top ten IPOs in Greater China from 2012 to 2016

2016 Company


Stock Exchange

Postal Savings Bank of China Co Ltd 7,629 Hong Kong

China Resources Pharmaceutical Group Ltd 1,942 Hong Kong

China Zheshang Bank Co Ltd 1,938 Hong Kong

Bank of Shanghai Co Ltd 1,537 Shanghai

China Merchants Securities Co Ltd 1,379 Hong Kong

Everbright Securities Co Ltd 1,151 Hong Kong

BOC Aviation Ltd 1,128 Hong Kong

DFZQ 1,080 Hong Kong

CSC Financial Co Ltd 1,057 Hong Kong

Bank of Jiangsu Co Ltd 1,042 Shanghai

Total 19,883 (42%)


Top ten IPOs in world history

Top ten IPOs worldwide in 2016

The top four IPOs in world history are based in China/Hong Kong.

Greater China stock exchanges account for three out of the top ten IPOs in world history. In 2014, Alibaba Group, the China-based e-commerce business, completed an IPO on the New York Stock Exchange raising USD 25 billion, the largest IPO recorded, surpassing the IPO of Agricultural Bank of China Limited in 2010 which raised a total of USD 22.4 billion. The IPO of Industrial and Commercial Bank of China Ltd is the third largest IPO in world history, raising USD 22 billion in 2006.

Four of the top ten IPOs in the world in 2016 were from Greater China, three of which were in Hong Kong with one in Shanghai.

Rank Listing year Company Stock Exchange Country USD million

1 2014 Alibaba Group Holding Ltd New York China 25,032

2 2010 Agricultural Bank of China Ltd Hong Kong & Shanghai China 22,430

3 2006 Industrial and Commercial Bank of China Ltd Hong Kong & Shanghai China 22,041

4 2010 AIA Group Ltd Hong Kong China (Hong Kong) 20,465

5 2008 VISA Inc New York United States 19,650

6 1998 NTT Mobile Communications Network Inc Tokyo Japan 18,379

7 2010 General Motors Co Ltd New York United States 18,140

8 1999 Ente Nazionale per I'Energia Elettrica Milan Italy 17,408

9 2012 Facebook Inc Nasdaq United States 16,007

10 1996 Deutsche Telekom Frankfurt Germany 13,036

Source: Thomson Financial

Rank Listing month Company Stock Exchange Country USD million

1 September Postal Savings Bank of China Co Ltd Hong Kong China 7,629

2 October innogy SE Frankfurt Germany 5,173

3 October Kyushu Railway Co Tokyo Japan 4,004

4 June DONG Energy A/S OMX Copenhagen Denmark 2,987

5 September Nets A/S OMX Copenhagen Denmark 2,372

6 November Samsung BioLogics Co Ltd Korea South Korea 1,962

7 October ConvaTec Group PLC London United Kingdom 1,943

8 October China Resources Pharmaceutical Group Ltd Hong Kong China 1,942

9 March China Zheshang Bank Co Ltd Hong Kong China 1,938

10 November Bank of Shanghai Co Ltd Shanghai China 1,537

Source: Thomson Financial


The amount of IPO funds raised in the US markets (NYSE and Nasdaq) decreased by 34% from USD 33.1 billion in 2015 to USD 21.8 billion in 2016, with a 36% decrease in IPO volumes.

The average deal size in the US was USD 0.18 billion, consistent with the USD 0.17 billion seen in 2015.

Comparison with the US markets


2014 2015 2016

Stock ExchangeNumber of

IPOsFunds raised

Average deal size

Number of IPOs

Funds raised

Average deal size

Number of IPOs

Funds raised

Average deal size

Hong Kong 122 30.0 138 33.8 126 25.2

Shanghai 43 5.5 89 16.7 103 14.7

Shenzhen 82 7.2 130 7.7 124 7.0

Taiwan 21 0.7 24 0.6 25 0.4

Greater China total 268 43.4 0.16 381 58.8 0.15 378 47.3 0.13

Nasdaq 187 21.5 141 16.2 87 10.2

NYSE 114 65.5 51 16.9 35 11.6

Nasdaq + NYSE total 301 87 0.29 192 33.1 0.17 122 21.8 0.18


The average deal size in Greater China was USD 0.13 billion in 2016 which is slightly lower than the USD 0.15 billion seen in 2015.

The value of equity trading in Greater China decreased by 52% to USD 20,978 billion reverting to more normal levels subsequent to the highs seen in 2015.

The value of equity trading in the US decreased by 5% to USD 28,389 billion in 2016 compared to USD 29,992 billion in 2015.

Value of equity trading (USD billion)

43,296

14,868

20,978

12,237 12,515 11,07115,868

17,477 17,318

Greater China Nasdaq NYSE

20142015

2016

Source: The World Federation of Exchanges website


Comparison with the European marketsThe IPO markets in Europe (including exchanges in the EU member countries plus Switzerland and Norway) decreased 27% by volume but decreased 58% by funds raised in USD terms, or 51% in Euro terms. In 2016, the number of European IPOs decreased to 265, well below the 430 IPOs recorded in 2011. Average deal size in Europe decreased from USD 0.17 billion in 2015 to USD 0.1 billion in 2016.

Value of equity trading (USD billion)


2014 2015 2016


IPOsFunds raised

Average deal size

Number of IPOs

Funds raised

Average deal size

Number of IPOs

Funds raised

Average deal size

Hong Kong 122 30.0 138 33.8 126 25.2

Shanghai 43 5.5 89 16.7 103 14.7

Shenzhen 82 7.2 130 7.7 124 7.0

Taiwan 21 0.7 24 0.6 25 0.4


London (Main Board) 53 18.7 55 15.8 28 5.6

London (AIM, SFM, PSM ) 84 4.2 37 2 39 1.4

London total 137 22.9 0.17 92 17.8 0.19 67 7.0 0.10

Europe total 375 58.6 0.16 364 62.3 0.17 265 26.4 0.10


In 2016, USD 47.3 billion of IPO funds were raised in Greater China by 378 IPOs, representing an average deal size of USD 0.13 billion, slightly higher than that seen in Europe.

The value of equity trading in Europe decreased by 19% from USD 13,232 billion in 2015 to USD 10,653 billion in 2016, exceeding the levels experienced in 2014.

43,296

10,65314,868

9,282

20,978

13,232

Greater China Europe

20142015

2016

Source: The World Federation of Exchanges website


Comparison with major Asian marketsThe number of IPOs in Japan decreased from 98 in 2015 to 90 in 2016. The IPO funds raised in Japan decreased significantly from USD 17.3 billion in 2015 to USD 9.8 billion in 2016. This decrease was primarily due to the simultaneous IPOs of Japan Post Holdings and Japan Post Bank which raised USD 10.7 billion in 2015.

The number of IPOs in Singapore (including Main Board and Catalist) increased from 13 in 2015 to 17 in 2016. IPO funds raised increased significantly from USD 0.4 billion in 2015 to USD 1.5 billion in 2016.

Australia experienced a 13% decrease in IPO volumes compared to 2015 with a 13% decrease in funds raised. Natural resource IPOs continued to be relatively weak reflecting commodity prices. The remaining IPOs mainly comprised technology, media, and telecommunications companies.

Malaysia continued its development as a capital market with IPO numbers consistent with 2015 but a decrease in IPO proceeds from USD 1 billion in 2015 to USD 0.2 billion in 2016.


2014 2015 2016


IPOsFunds raised

Average deal size

Number of IPOs

Funds raised

Average deal size

Number of IPOs

Funds raised

Average deal size

Hong Kong 122 30.0 138 33.8 126 25.2

Shanghai 43 5.5 89 16.7 103 14.7

Shenzhen 82 7.2 130 7.7 124 7.0

Taiwan 21 0.7 24 0.6 25 0.4


Japan Exchange Group (Tokyo and Osaka)*

80 10.8 95 17.3 88 9.8

Sapporo Securities Exchange

- - 1 - - -

Nagoya Stock Exchange

3 - 1 - 2 -

Fukuoka Stock Exchange

- - 1 - - -

Japan total^ 83 10.8 0.13 98 17.3 0.18 90 9.8 0.11

Main Board 10 2.3 1 0.2 6 1.5

Catalist 18 0.2 12 0.2 11 -

Singapore total 28 2.5 0.09 13 0.4 0.03 17 1.5 0.09

Malaysia 11 0.5 0.05 11 1.0 0.09 12 0.2 0.02

Australia 78 16.3 0.21 99 6.2 0.06 86 5.4 0.06

* include J-REIT ^ the offering value includes global offering



Bond issued in mainland China

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2014

3,769

1,108.5

2015

5,851

1,518.5

2016

6,845

1,715.5

Debt issued in mainland China and Hong Kong

Mainland China

In 2016, the number of issues increased by 17% compared to 2015 with a 13% increase in amounts raised. The increase in volumes reflects the continued low interest rate environment and a desire by corporates to diversify funding sources away from equity finance and bank debt.

There has been strong policy support to develop mainland China’s bond markets. In 2015, the People’s Bank of China announced that certain foreign corporates, financial institutions and sovereign entities would have open access to the interbank debt market to issue RMB-denominated bonds (so called ‘Panda’ bonds) in mainland China. A number of foreign entities have already taken advantage of this opportunity in 2016.

Hong Kong

Hong Kong is a liberal debt market where international investors are free to invest in debt instruments and there are no restrictions on foreign borrowers. The bond market in Hong Kong has for some time been a significant market place for issuers and investors, in both domestic and foreign currencies. The range of product offerings, the open access for issuers and investors, both domestic and international, and the increasing significance of offshore RMB bond issuances make Hong Kong one of the most frequented international bond markets in Asia. Issuers can select whether they wish to list instruments on the Hong Kong Stock Exchange or issue privately where trading occurs outside stock exchange. Generally, larger issues tend to be completed via a listing.

There was a 19% increase in the volume of debt issues in Hong Kong in 2016 with the overall amount of funds raised remaining at 2015 levels reflecting smaller average issue sizes.

Source: Hong Kong Stock Exchange, Thomson Financial and Wind

Bond issued in Hong Kong

0

50

100

150

200

250

300

Number Amount raised (USD billion)

2015 20162014

281

124

177

96.9

211

99.9


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The China/Hong Kong Capital Market Services practice is part of the PwC global network of capital markets specialists.

China/Hong Kong Capital Market Services practice partners and directors

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About Greater China IPO Watch

Greater China IPO Watch surveys all new listings on Greater China’s principal stock markets and market segments. All of the graphs, tables, and data used within this publication have been collated or extracted by the Capital Market Services practice research team. In collating and extracting this information, we rely upon data provided directly by various exchanges, and extracted from the World Federation of Exchanges website. We do not carry out any confirmation procedures on that information.

Going public is a major challenge for any company and there are many decisions that will need to be taken prior to an IPO. Management will need to steer the company through a complicated and often time-consuming process in order to be ready for an IPO. Planning and good preparation are crucial for a successful flotation. It’s not simply a question of appointing advisors but about ensuring that the company is ready to be listed on the public markets and that it is able to meet the challenges that such a listing brings. If you are planning on listing, there will be many questions you will want to ask. These are just some of the questions we will be able to help you find answers to:

• What is an appropriate valuation for my business?

• What does being a public company really mean?

• How long will it take to complete an IPO?

• Do we have the right resources?

• Are my people ready?

• How to implement a stock based compensation plan?

• Do we have an attractive story for potential investors?

• What is the best way to articulate our strategy?

• What are the corporate governance issues we need to address?

• What are the internal control procedures we need to implement?

• How many non-affiliated/independence directors should we have on the board?

• What are the implications of a concurrent offering of shares to sophisticated investors in the US (via 144A) or elsewhere (via Reg S)?

• How do our accounting policies compare with other companies in the sector?

• Is my finance function ready?

• Are my operations run and managed effectively?

• What additional disclosures will we need to provide as a public company?

• Will it be a problem if one of our subsidiaries has a modified audit opinion?

• Do we need to restate our track record for recent acquisitions and disposals?

• How will an IPO affect our existing incentive arrangements?

• Any other possible listing venues?

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Greater China IPO Watch 2016 - PwC · Greater China IPO Watch 2016 1 The Hong Kong stock market consists of two separate boards: the Main Board (MB) and the Growth Enterprise Market