Yang Yunfei

1017800664@qq.com

SHENZHEN leads major Chinese cities in the number of companies seeking to list shares on the domestic stock exchanges.

Latest data from the Beijing, Shanghai, and Shenzhen stock exchanges show that as of Jan. 31, a total of 681 companies had submitted applications for A-share initial public offerings (IPOs), seeking to raise a combined 766.80 billion yuan (US$106.59 billion).

Shenzhen has the largest number of IPO hopefuls among major Chinese cities, with 58 companies awaiting approval from regulators to launch their first-time share sales. Shanghai comes in second with 55 and Beijing follows with 51 companies, according to the exchange data.

In fact, the number of firms filing IPO applications has decreased significantly since August 2023, when regulators tightened approval of new IPOs amid sluggish market conditions.

The protracted weakness in the domestic stock market has also dented IPO activities, with some firms withdrawing their IPO applications, leading to a sharp drop in the number of companies in the IPO pipeline.

Official figures showed that from 2020 to 2022, the number of companies seeking A-share IPOs had remained around 900.

The still strong IPO pipeline comes as the number of listed companies on the Chinese domestic stock market swelled to reach 5,346 by the end of 2023, according to a monthly report published by the China Association for Public Companies last week.

Domestic exchanges saw an addition of 313 newly listed firms in 2023. The Shanghai Stock Exchange turned out to be the top global listing venue, where companies raised US$31.30 billion via IPOs during the year. The Shenzhen exchange was the second-biggest IPO hub with US$22 billion raised, followed by NASDAQ, with new listings worth US$12.50 billion, according to a report from consultancy KPMG.

As Chinese stocks plunged to fresh five-year lows yesterday, regulators are urged to suspend approval of new IPOs in a bid to stem market slides, a measure repeatedly adopted in a sluggish market previously.

With its vibrant private economy that has spawned a large number of technologically innovative firms, Shenzhen, known as the “Silicon Valley of China,” is home to some of China’s most successful public companies, such as Tencent Holdings, BYD Co., China Merchants Bank and Shenzhen Mindray Bio-Medical Electronics Co.

The southern China metropolis added 23 A-share listed firms last year, bringing the number of firms traded on domestic stock exchanges to 423, trailing only Beijing and Shanghai among China’s major cities, according to financial service provider Wind Info.

Shenzhen has a large pool of listing hopefuls. A total of 48 companies in the city have begun the so-called pre-listing tutoring process with investment banks ahead of a planned IPO, local media quoted official data as reporting in October last year.

Pre-listing tutoring is a compulsory procedure in China that every IPO applicant must go through before filing its listing plan to regulators, which can take between three and 12 months. During the tutoring period, investment bankers coach company executives on IPO-related issues.

Shenzhen has set an ambitious goal to list the city’s firms.

According to an action plan unveiled Nov. 16 in 2022 by Shenzhen’s industry and information technology bureau, the number of Shenzhen-based companies listed on domestic and foreign stock exchanges is expected to exceed 600 by 2025, with funds raised from their IPOs and refinancing topping 300 billion yuan and a total of more than 3,000 companies in the pipeline for listing.