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Outlook remains optimistic for IPOs in China’s Technology, Media and Telecommunications sector

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.


PwC recently released its analysis of initial public offerings (IPOs) by Chinese technology, media, and telecommunications (TMT) companies in the first half of 2023. Both listings and value of funds raised decreased in the first quarter. However, performance picked up in the second quarter, driven by the STAR and ChiNext Markets – the number of listings was comparable to the same period in 2022. The number Mainland China TMT IPOs fell from 124 in the second half of 2022 to 66 in the first half of 2023. Total financing decreased from RMB133.5 billion in the second half of 2022, to RMB82.9 billion in the first half of 2023.


China’s capital markets benefited from the implementation of its new registration system in the first half of 2023. The role of financial institutions as gatekeepers in the capital markets has also been strengthened and emphasised. A multi-tiered capital market is now emerging.


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


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 RMB60.6 billion in financing, accounting for 74% of the total over the period. There were a further 13 TMT IPOs on the Shenzhen ChiNext Market, which raised RMB14.2 billion, or 17% of total financing. Another nine companies, listed on the Beijing Stock Exchange and raised an estimated RMB1.2 billion, or 1% of the total. Two companies on China’s Main Board secured around RMB2.8 billion 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 RMB4.1 billion, reflecting 5% of total capital raised.


Altogether, 42 IPOs (64%) were completed 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.


The average P/E ratio for TMT companies listed on the A-share market remained stable during the second half of 2022. However, the multiple rose from 34x to 47x in the first half of 2023.


As of 30 June 2023, the total market capitalisation of the 230 TMT enterprises listed on the STAR Market was RMB429.9 billion, with an average financing of RMB1.869 billion and an average initial P/E ratio of 86x.


Since the first batch of listings on the ChiNext Market in 2020, 464 companies have raised RMB458 billion, with an average financing of RMB987 million, and an average initial P/E ratio of 38x.


Over this period, 33 Mainland Chinese companies listed on the Main Board of Hong Kong, raising HKD17.8 billion, at an average P/E (excluding loss-making companies) of 17x.


Frank Cai, PwC Mainland China Media Leader said, “In March 2023, the Hong Kong Stock Exchange (HKEX) released consultation conclusions on the listing system for specialised technology companies, deciding to include Chapter 18C in the Main Board Listing Rules. 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. This provides a tailwind for enterprises in industries such as new generation information technology, advanced hardware, advanced materials, new energy, energy conservation, and environmental protection. It also demonstrates the determination of HKEX to attract technology companies to go public on the Hong Kong capital market. Recently, the Hong Kong SAR government announced the establishment of a task force to promote stock market liquidity. This move will further promote the sustainable development of Hong Kong's capital market and enhance its competitiveness.”


The first half of 2023 saw a total of 19 Mainland Chinese companies listing on the US stock market, bringing total financing of USD473 million and an average initial P/E ratio of 28x (excluding loss-making companies). The total financing for the six TMT enterprises was USD299 million, with an average financing amount of USD50 million and an average initial P/E ratio of 38x (excluding loss-making companies).


Alex Chan, PwC China Assurance Partner observed, “In the first half of 2023, the number of Chinese companies going public in the United States rebounded significantly. With the implementation of rules for filing of overseas listings, the process for Chinese enterprises to list overseas has become more straightforward. This will provide more options and flexibility for Mainland TMT companies seeking listings.”


 

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