Photographer: Anthony Kwan/Bloomberg

China IPO Fundraising Set to Jump as State Pushes Debt Reduction

  • IPO volumes in China to increase 50% in 2017: Bloomberg survey
  • Chinese regulator poised to approve more listings this year

Fundraising from Chinese domestic initial public offerings in 2017 is expected to jump to the highest level in six years, as the government turns to the stock market to help companies reduce debt.

The volume of first-time share sales in mainland China is forecast to rise 50 percent to about 225 billion yuan ($32.4 billion), according to the median estimate in a Bloomberg survey of analysts. The increase would follow a surge in the fourth quarter, when the amount raised from A-share IPOs was more than six times a year earlier, data compiled by Bloomberg show.

Last month’s Central Economic Work Conference, an annual gathering in Beijing of top party officials, emphasized debt reduction as a key priority and encouraged equity fundraising. The focus on selling stock signals China’s market regulator may quicken the pace of listing approvals, allowing more companies to sell stock this year, Dai Ming, a fund manager at Hengsheng Asset Management Co. in Shanghai, said by phone.

“Equity financing for now seems to be a better way to lower leverage,” said Dai, who forecasts IPO fundraising would increase at least 50 percent. “The IPO market is more stable now.”

The China Securities Regulatory Commission needs to approve IPO plans before a company can list. The queue of applications under review totaled 637 as of Dec. 29, down from more than 730 at mid-year, the CSRC website shows.

A total of 227 companies completed initial public offerings in China in 2016, eight more than the previous year, while the fundraising amount fell 5.6 percent to 150.1 billion yuan, according to data compiled by Bloomberg. The pace of listings accelerated in the fourth quarter last year, when China hosted 102 new listings totaling 73.5 billion yuan, up 54 percent from the amount raised in the third quarter, the data show.

“The IPO approval rate will continue to quicken,” Frank Lyn, the China and Hong Kong markets leader at PricewaterhouseCoopers, said at a media briefing this month in Beijing. “Investor demand for new A-share listings remains strong.”

Price Surge

An increase in volumes would also help mitigate the typically rapid post-IPO price surge on Chinese bourses that hit a peak in 2016, survey participants said.

New listings last year rose an average 430 percent in their first month of trading, the highest since at least 1999, according to Bloomberg-compiled data. They gained an average 454 percent in the first six months, the data show. The Shanghai Composite Index fell 12 percent last year.

“The increased supply of new shares in 2017 will suppress the post-IPO price surge,” Lin Jin, a Shanghai-based analyst at Shenwan Hongyuan Group Co., said by phone.

China International Capital Corp., ChinaVenture Investment Consulting Group, Credit Suisse Group AG, CSC International Holdings Ltd., Deloitte LLP, Dongxing Securities Co., Hengsheng Asset Management, Northeast Securities Co., PricewaterhouseCoopers, Shenwan Hongyuan, Southwest Securities Co. and Wellspring Capital Management Co. participated in the survey.

— With assistance by Feng Cai, Amy Li, and Crystal Tse

Before it's here, it's on the Bloomberg Terminal.