Momentum for domestic listings of Chinese TMT companies continues in the second half of 2023

Chinese concept stocks on course to rebound further

Shanghai, 22 February 2024 – Today, PwC released its analysis of initial public offerings (IPOs) by Chinese technology, media, and telecommunications (TMT) companies in the second half of 2023. During this period, global capital markets experienced a slowdown, resulting in a decrease in both listings and value of funds raised compared to the first half of 2023. The number of listings declined from 66 in the first half of 2023 to 50 in the second half of 2023. Total financing decreased from RMB 82.9 billion in the first half of 2023 to RMB 61.8 billion in the second half of 2023. The largest mainland China TMT enterprise IPO in the second half of 2023 was by Hua Hong Semiconductor Limited, which listed on the STAR Market (accruing approximately RMB 21.2 billion).

Notably, the comprehensive registration system for China's capital market was implemented in 2023. The system plays a significant role in increasing the proportion of financing, promoting sustained high-quality economic development, and creating a market-oriented, law-based and internationalised business environment.

Wilson Chow, PwC Global TMT Industry Leader, commented, "Despite the recent tightening of the pace for domestic IPOs and the slowdown in the global capital market, China maintains its leading position in terms of IPO fundraising. As the comprehensive registration system steadily progresses, China's capital market continues to demonstrate strong vitality. In 2024, we expect China's economic development will gradually enter a new stage. We anticipate continuous enhancement of full supervision for the registration system. The improvement of a multi-layer capital market system will provide new listing opportunities for companies featuring innovative technology, advanced manufacturing, and sustainable orientations. Additionally, with the introduction of direct IPO reform of the Beijing Stock Exchange, the Beijing Stock Exchange is anticipated to enter a phase of rapid development in 2024 and offer a new listing venue for small and medium-sized technology companies."

In the second half of 2023, the domestic capital market remained the main listing destination for Mainland China TMT enterprises, with 24% and 32% of businesses going public on the STAR and ChiNext Markets, respectively. The 12 TMT IPOs on the STAR Market secured RMB 33.9 billion in financing, accounting for 55% of the total amount garnered over the period. There were a further 16 TMT IPOs on the Shenzhen ChiNext Market, which raised RMB 13.7 billion, or 22% of total financing. Another 8 companies were listed on the Beijing Stock Exchange, and 1 on the Main Board. Altogether, 13 Mainland TMT companies opted to list in Hong Kong or overseas markets, securing financing in the region of RMB 6.8 billion, reflecting 11% of total capital raised.

Altogether, 32 IPOs (64%) were completed in the technology hardware and equipment industry; 17 IPOs (34%) were in software and services; and 1 IPO (2%) was from the media sector. Technology hardware and equipment raised the most revenue.

Huaqin Technology Co., Ltd. listed on the Main Board, raised higher revenue than other companies that listed in the second half of 2023. Consequently, the average revenue for companies listed on the Main Board was higher.

Apart from TMT enterprises listed on the STAR Market, the average P/E ratio for A-share TMT companies remained stable to the end of December 2023, compared with the previous period. The average P/E ratio for A-share TMT companies dropped from 47x on 30 June 2023 to 40x on 31 December 2023, remaining at a high level.

As of 31 December 2023, the total market capitalisation of the 242 TMT enterprises listed on the STAR Market was RMB463.7 billion, with average financing of RMB1.916 billion and an average initial P/E ratio of 87x.

Since the first batch of listings on the ChiNext Market under the registration system on 24 August 2020, a total of 522 companies have been listed on the ChiNext board and have raised RMB515.5 billion, with average financing of RMB988 million, and an average initial P/E ratio of 39x. Among these listings, 133 companies have raised RMB131.1 billion, with average financing of RMB986 million, and an average initial P/E ratio of 47x.

Jianbin Gao, PwC Mainland China TMT Industry Leader, said, "In 2023, the fundraising activities in the Hong Kong market slowed down significantly due to a range of factors, including global economic uncertainty. To continuously enhance the attractiveness of the Hong Kong capital market, the Hong Kong Stock Exchange introduced Chapter 18C in March 2023, which has opened up a listing pathway for Specialist Technology Companies. In September 2023, the Stock Exchange initiated consultations on the reform of the Growth Enterprise Market (GEM). These series of measures will contribute to the diversified development of the Hong Kong capital market and demonstrate its determination to attract technology IPOs. It is expected that, as various factors causing instability subside and market demands recover, the Hong Kong market will be able to leverage its robust capital market advantages, in combination with regulatory reforms and optimisation measures to attract Specialist Technology Companies for listing."

Jianbin Gao further added, "In 2023, the number of Chinese concept stocks listing in the US showed signs of recovery. Regulatory authorities have shown a supportive attitude towards private enterprises that meet the conditions for listing overseas. Concurrently, the maturity of the overseas listing filing management rules has paved the way for Chinese companies to access international capital markets. As geopolitical tensions gradually ease, we expect that the listing of Chinese concept stocks in the US market will rebound further in 2024."

Notes to editors 

Download PwC’s 2023 H2 TMT IPO Review and Outlook report (Simplified Chinese):
https://www.pwccn.com/zh/industries/telecommunications-media-and-technology/publications/tmt-ipo-review-outlook-2023-h2.html