China’s technology, media and telecommunications (TMT) sectors saw 49 initial public offerings in the second half of 2017, garnering a total of 50.2 billion yuan ($8 billion), according to global accounting firm PwC.
CDRs, or China Depositary Receipts, are expected to be launched soon, which will lead to more listing options for China’s TMT enterprises this year.
Some 41 percent of Chinese TMT companies were listed on the Growth Enterprises Market Board in Shenzhen during the second half of 2017, while 27 percent went public on the Main Board. Sixteen percent were listed on the Small and Medium Enterprises Board in Shenzhen, and another 16 percent on overseas markets, PwC said.
Walter Zhang, PwC China Assurance Partner, said: “Chinese TMT IPOs maintained strong momentum over the year, with the total proceeds doubling year-on-year. The number of TMT IPOs also grew by 50 percent from 2016.”
However, Zhang noted that more Chinese TMT companies turned to overseas capital markets in the second half of 2017. Notably, the proceeds from overseas listings accounted for more than 50 percent of the total in the second half, reflecting a record high for recent years.
The report also said the average price-to-earnings ratio of A-share listed TMT companies has continued on a downward trajectory in recent years. As of June 30, 2016, the average price-to-earnings ratio of A-share TMT companies reached 71, and declined by just over 30 percent to 49 by Dec 31, 2017.
“The number of Chinese TMT IPOs is expected to remain stable this year, and China will maintain its leading position as one of the world’s hottest IPO markets,” said Amanda Zhang, a group leader of PwC China.
She added that a notable future dynamic will stem from the introduction of the CDR system, which will lead to high-quality innovative companies that had listed abroad looking to return to the A-share market.
“Significantly, the CDR launch will also be appealing for unicorns, which have already built overseas structures, but haven’t yet listed overseas.”
Last month, Bilibili Inc, a Chinese video-sharing platform for younger viewers and iQiyi.com, an online streaming video service provider, went public in the United States, but they had a rocky first day with shares dropping below their IPO prices.
The two companies are isolated examples, and will not be a common phenomenon or trend for Chinese tech companies listed in US stock markets in the future, Amanda Zhang said, but she admitted that the recent trade friction between China and the US will have an adverse impact on all of the tech shares in the short term.