Niche tech firms ride favorable policies on way to IPOs

Innovative technology companies on the Chinese mainland are expected to usher in new development opportunities as the economy sustains its recovery momentum and authorities have rolled out a slew of measures to invigorate the nation's capital markets and boost investor confidence, said a report released by global consultancy PwC.

The Hong Kong stock exchange has further lowered the listing threshold for special technology companies that are in a stage of initial commercialization or have yet to complete commercialization. This will promote the sustainable development of Hong Kong's capital market and enhance its competitiveness, according to the report.

There were 66 IPOs by Chinese mainland TMT (technology, media and telecom) enterprises in the first half of the year, down from the 124 IPOs recorded during the second half of 2022, PwC said. The total amount of financing for the 66 listings reached about 82.9 billion yuan ($11.4 billion), it added.

The performance of Chinese mainland TMT companies in the capital market picked up in the second quarter of the year, mainly driven by the Shanghai Stock Exchange's STAR Market and the Shenzhen exchange's ChiNext board in Guangdong province.

The domestic capital market was the main listing option for Chinese mainland TMT enterprises, with 39 percent choosing to be listed on the STAR Market and 20 percent on the ChiNext in the first half of the year, the report showed.

A total of 26 Chinese mainland TMT enterprises chose to list on the STAR Market, and raised about 60.6 billion yuan, accounting for 74 percent of total financing, while there were 13 TMT industry IPOs on the ChiNext that recorded financing of 14.2 billion yuan, making up about 17 percent of total financing.

A further nine Chinese mainland TMT enterprises chose to list on the Beijing Stock Exchange, which received about 1.2 billion yuan, or 1 percent of total financing. Additionally, 16 Chinese mainland TMT enterprises, or 24 percent of the total number of IPObound enterprises, opted to list in Hong Kong or overseas, netting 4.1 billion yuan, or 5 percent of the total proceeds.

In the first half, there were a total of 42 IPOs in the technology, hardware and equipment industry, 20 IPOs in the software and service industry, and four IPOs in the media industry, the report said.

China has halved the stamp duty on stock transactions to boost the confidence of capital market investors, according to a notice issued by the Ministry of Finance and the State Taxation Administration in August.

The China Securities Regulatory Commission has said that the nation will temporarily slow the pace of IPOs and further regulate major shareholders' share reductions.

Experts said the policy mix will promote a more virtuous cycle of investment and financing and inject more confidence and certainty into the market.

"Looking ahead, the policies will guide the long-term and healthy development of the A-share market," said Gao Jianbin, PwC Chinese mainland TMT industry leader.

The across-the-board registration-based IPO system will also further improve issuance efficiency and listing predictability across the domestic stock market, he said.

Moreover, in the first half, the number of Chinese companies going public in the United States rebounded significantly, PwC added.

The implementation of regulations for the filing-based management of Chinese companies' overseas securities offerings and listings will provide more options and flexibility for Chinese mainland TMT companies seeking public floats.

The Hong Kong bourse's move to further lower the listing threshold for technology companies demonstrates its determination to attract technology companies to go public on the Hong Kong capital market, said Walter Zhang, assurance markets leader for PwC North China.

It will benefit companies in new-generation information technology, advanced hardware, advanced materials, new energy, energy conservation and environmental protection, Zhang said.