Despite a global pandemic, China’s equity markets have defied expectations and continued to grow. This is especially true for the country’s IPO market, which has seen a surge in new listings in recent years. In fact, according to a new report from Ernst & Young, China is on track to lead the world in equity IPO volumes in 2022.
This is thanks in large part to the country’s strong economic recovery from the pandemic. So what does this mean for global investors? For one, it means that there will be more opportunities to invest in Chinese companies.
It also means that we can expect to see more Chinese companies listing on global exchanges. So if you’re looking to get in on the ground floor of some of the world’s biggest companies, keep your eye on China’s IPO market.
What Is An IPO?
An IPO, or initial public offering, is the first sale of stock by a company to the public. IPOs are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately held companies looking to become publicly traded.
In an IPO, a company offers shares of itself to investors in exchange for money. The company then uses that money to finance its operations and growth. Investors in an IPO hope to make money by buying shares at a low price and selling them at a higher price later on.
IPOs are risky investments, however, because there is no guarantee that a company will be successful or that its stock will increase in value. Before investing in an IPO, it is important to do your research and consult with a financial advisor.
Why Did China Lead In IPO Volume?
There are a number of reasons why China led in IPO volume in 2019. First, the Chinese economy has been growing at a rapid pace in recent years, which has led to an increase in the number of companies looking to go public. Second, the Chinese stock market has been performing well in recent years, making it an attractive destination for companies looking to list their shares. Finally, the Chinese government has been supportive of IPOs and has made it easier for companies to list their shares on the country’s exchanges.
What Types Of Companies Went Public In China?
There were a total of 746 IPOs in China in 2020, raising a combined US$209.6 billion. This made China the country with the most IPOs globally, as well as the country with the largest amount of money raised through IPOs.
The majority of these IPOs were from companies in the technology and healthcare sectors. Other popular sectors for IPOs included transportation, real estate, and industrials.
Some of the most notable companies that went public in China last year include ByteDance (the owner of TikTok), online retailer Pinduoduo, pharmaceutical company IPO Biostar Pharmaceuticals Inc., and e-commerce platform Meituan Dianping.
What Does This Mean For The Future Of The IPO Market?
In 2019, China led the world in equity IPO volume for the first time ever. This is a significant development, as it indicates that Chinese companies are increasingly confident in their ability to compete on a global scale.
This trend is likely to continue in the years to come, as more and more Chinese companies look to tap into international capital markets. This will provide a major boost to the global IPO market, which has been relatively subdued in recent years.
So what does this all mean for the future of the IPO market? In short, we can expect to see more activity from China, and this is likely to lead to an increase in overall global IPO volumes. This is good news for investment banks and other financial institutions that benefit from the increased deal flow.
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Overseas Listings Drop
Global equity IPO volumes dropped in the first quarter of 2019, with China leading the way.
China’s IPO market suffered a setback in the first quarter of 2019, with volumes falling by more than 60% from the previous quarter. However, China still accounted for the lion’s share of global equity IPO activity, with 97% of all deals coming from Chinese companies.
The US IPO market also cooled off in the first quarter, with just 16 deals raising $1.6 billion. This was down from 37 deals and $13.6 billion in the fourth quarter of 2018. Europe saw a similar slowdown, with just 13 IPOs raising €1.3 billion in the first quarter. This was down from 30 deals and €10.9 billion in the fourth quarter of last year.
The slowdown in global equity IPO activity is partly due to macroeconomic headwinds, such as the US-China trade war and slowing economic growth in China.
The Bottom line
China led the world in equity IPO volumes in 2022, with a total of $32.9 billion raised. This was followed by the United States ($24.6 billion), Japan ($8.1 billion), and Hong Kong ($5.4 billion). The top three banks that acted as lead underwriters for these IPOs were Goldman Sachs, JP Morgan, and Morgan Stanley.