China’s IPO market is about to maintain booming in 2021, says investor

SINGAPORE – China’s IPO market will continue to boom next year even after a blockbuster in 2020, according to the chief investment officer of a Chinese financial services company.

It’s 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 around $ 75 billion was raised from around 400 listings.

“In terms of the size and volume of the IPO in China’s domestic market, it has reached a historic … high point in the past 10 years,” said Ma, the company’s chief investment officer.

That trend is likely to continue, he said, as both domestic and institutional investors have “huge demand” while new economy companies go public.

Attendees attend the listing ceremony of Shenzhen Longtech Smart Control Co., Ltd. and Shanghai Hi-Road Food Technology Co., Ltd. participated in the Shenzhen Stock Exchange on December 2, 2020 in Shenzhen, Guangdong Province, China.

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China’s global IPO dominance

According to a study by EY, share listings of Chinese companies dominated the ranking in 2020.

Among the top 10 listings worldwide, Chinese companies made up half of the list and also occupied the top 3 places. These include the listing of the Chinese chip manufacturer SMIC on the STAR market in Shanghai and the secondary listing of the e-commerce heavyweight in Hong Kong. No company in the Asia-Pacific region outside of China has managed to crack the top 10.

However, there was also one notable exception among Chinese firms – the financial technology giants and Alibaba-affiliated Ant Group. The company’s much-anticipated dual listing in Shanghai and Hong Kong was set to become the world’s largest public listing. However, that IPO was abruptly suspended in November as the company is subject to regulatory scrutiny.

Ringo Choi, EY’s Asia Pacific director of IPOs, told CNBC that the strength of the Chinese companies on the list shows the importance of the mainland’s economy as well as their ability to influence stock market performance.

“That’s why every market, company or company on the mainland is trying to get an IPO,” said Choi.

Still, the potential market returns on the domestic listing should be an attractive proposition for companies in mainland China, he said.

EY research found that the first-day IPOs return in 2020 for the Shanghai Stock Exchange’s Nasdaq-style STAR market was a whopping 187%, compared with 44% for the Shanghai mainboard.

By comparison, Snowflake – the largest software IPO of all time and the largest company outside the mainland to make a public debut this year – rose more than 111% on its first day of trading on the New York Stock Exchange in September.

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