China leads global equity IPO volumes this year

© Reuters. FILE PHOTO: A sign for STAR Market, China's new Nasdaq-style tech board, is seen before the listing ceremony of the first batch of companies at Shanghai Stock Exchange (SSE) in Shanghai, China July 22, 2019. REUTERS/Stringer

By Patturaja Murugaboopathy and Gaurav Dogra

(Reuters) - Chinese companies are at the forefront of global stock offerings this year, with their issuances being facilitated by easy monetary settings at home and a lack of clarity on access to offshore capital markets.

According to Refinitiv data, Chinese companies have raised $71.2 billion through initial public offerings (IPOs) in the domestic and overseas markets this year, which is lower than the $98.48 billion raised in the same period last year.

But it's much higher compared to the U.S. companies' issuance of $17.3 billion and Europe's $16.4 billion so far.

The increase in mainland IPOs comes as companies and dealmakers await final rules from the China Securities Regulatory Commission and Cyberspace Administration of China that will govern overseas listings, especially for firms that handle data.

Graphic: IPO proceeds of Chinese, US and European issuers - https://fingfx.thomsonreuters.com/gfx/mkt/dwvkdralkpm/IPO%20proceeds%20of%20Chinese%20US%20and%20European%20issuers.jpg

"China's domestic market is less impacted by global volatilities. Internally, China has a lower inflation environment and loosening monetary policy, equity market valuation is more resilient," said Mandy Zhu, head of China Global Banking - UBS.

While global central banks are grappling with a surge in inflation, price pressures are rather benign in China, with interest rates there being cut.

Shanghai United Imaging Healthcare Co Ltd led China's IPO issuance this year, raising $1.63 billion, followed by Hygon Information Technology Co Ltd and Jiangxi Jinko Pv Material Co Ltd, raising $1.6 billion and $1.58 billion, respectively.

Graphic: Biggest Chinese IPOs so far this year - https://fingfx.thomsonreuters.com/gfx/mkt/xmpjkoleevr/Biggest%20Chinese%20IPOs%20so%20far%20this%20year.jpg

While a surge in volatility has prompted global investors to exit riskier equity markets in the last few months, Chinese markets have been relatively resilient.

According to Refinitiv Lipper, global equity funds witnessed outflows of $144 billion since April, while Chinese equity funds received inflows worth $21.3 billion.

OVERSEAS LISTINGS DROP

However, Chinese companies' listings overseas have dropped sharply this year.

The data showed that IPO issuances on the mainland fell just 11%, while Chinese listings in U.S. and Europe slumped 97% and 81%, respectively.

Analysts said the declines in overseas listings are due to concerns over China's COVID-19 lockdowns, growth worries, ongoing audit disputes with the United States, and uncertainties over offshore listing rules.

"We expect international issuance volume to recover, too, led by valuation re-rating in secondary markets. Hong Kong has accumulated a strong IPO pipeline, which will see a surge of issuance when the market recovers to a supportive level," said UBS' Zhu.

She added that a recovery in the U.S. market listings will take a longer time, given the uncertainty over U.S.-China relations.

Graphic: Breakdown by sector for Chinese issuers' total IPO proceeds this year - https://fingfx.thomsonreuters.com/gfx/mkt/zjpqjkeoavx/Breakdown%20by%20sector%20for%20Chinese%20issuers'%20total%20IPO%20proceeds%20this%20year.jpg