The number of initial public offerings (IPOs) activities in China slowed down in the three months to September from the previous quarter, as the securities regulator moved to reduce share sales to help boost the country’s flagging stock market. There were 91 listings worth CNY114 billion recorded in the third quarter, down from 105 listings worth CNY144.6 billion in the previous quarter. In the first nine months of the year, a total of 264 new share listings in mainland China raised CNY323.6 billion, which marked a 0.33% decline from the number of IPOs in the same period in 2022.
Shanghai’s Nasdaq-style Star market was the mainland’s top IPO venue during the past three quarters, with a total of CNY139.6 billion raised. It was followed by Shenzhen’s start-up-focused ChiNext Market, which raised CNY112 billion. Shanghai’s main board, meanwhile, raised a total of CNY39.6 billion in the same period, compared to CNY21.4 billion in Shenzhen and CNY11.1 billion in Beijing. The sluggish state of new mainland IPOs in the third quarter reflected the waning confidence in China’s economic recovery efforts.
The IPO slowdown last quarter has come amid measures issued by regulatory authorities to boost the country’s capital markets. These initiatives include reducing trading and transaction costs, improving the liquidity of the Beijing Stock Exchange, and restricting the ability of loss-making listed companies to pursue refinancing deals. The third quarter also saw a total of 74 IPO withdrawals. That number made up 40% of the 184 IPO withdrawals recorded in the first nine months of the year. Of the 74 withdrawn share listings, 12 were in the consumption goods category. These included popular brands such as Dezhou Braised Chicken, a meat producer and retailer based in Shandong.
The IPO withdrawals came on the heels of rules issued by the China Securities Regulatory Commission (CSRC) to tighten the pace of new share sales and limit the number of local companies in certain sectors from going public. That action was meant to channel funding into more strategic hi-tech industries, such as semiconductors and biotech. In January, the country’s securities watchdog gave companies in the food-and-beverage sector and Covid-19-testing segment a “red light” status, which barred these firms from gaining access to equity financing in the Shanghai and Shenzhen stock exchanges.
The regulator also identified several “yellow light” industries – including apparel, home appliances and furniture – that meant major companies in these areas could be considered for an IPO. Meanwhile, companies that require heavy debt financing to expand would be under close scrutiny. Since Beijing rolled out a new registration-based IPO system in February this year, a total of 18 companies in the consumption goods category have withdrawn their listing applications in Shanghai and Shenzhen. More than 20 food-and-beverage and apparel-related companies are currently waiting for their IPO applications to be approved, the South China Morning Post reports.
