Chinese banks edge out Wall Street rivals in global IPO rankings

CHINESE lenders have leapt ahead of their Wall Street peers in global rankings for initial public offerings (IPOs), as China wraps up a record year for listings which bucked one of the worst slowdowns in deals history.

Citic Securities pushed ahead of Goldman Sachs Group as the top underwriter of IPOs this year, followed by China International Capital and China Securities, as indicated by Bloomberg league tables. It is the first time the top three spots are held by mainland lenders since at least 1999. Six out of the world’s top 10 IPO banks are Chinese, commanding a 28 per cent market share. 

Chinese brokerages have muscled into the IPO market historically dominated by global banks, particularly in places like Hong Kong. A push by mainland authorities in recent years to encourage more listings on domestic exchanges will offer local lenders a larger IPO market to tap in China.

At the same time, rising tensions with the US have caused a near-total collapse in New York IPOs by Chinese companies – a big business for Wall Street – and pushed them to list domestically or in Hong Kong instead.

“The trend of some firms opting for a Hong Kong listing next year may continue, and that share of the market might be filled by Chinese banks, rather than foreign banks which have an edge in overseas listings,” said Wang Yugang, fund manager at Beijing Axe Asset Management.

While listings worldwide have suffered their steepest year-on-year slump since 2008 on the back of rampant inflation and interest rate hikes, the Chinese IPO market has had a record year with US$93.8 billion raised so far. That is 45 per cent of the global IPO haul of nearly US$208 billion, data compiled by Bloomberg showed. The US – usually the world’s biggest IPO market – contributed just US$24 billion.

China’s onshore IPO market managed a record year despite an ongoing property crisis and adherence to its zero-Covid policy. With China now abruptly abandoning that pandemic stance, the IPO boom will likely continue, although the surge in Covid cases poses a risk to the country’s economic outlook.

Citic Securities worked on 82 listings this year, more than those of Goldman and Citigroup combined. They include the US$5 billion Shanghai share sale by China’s largest offshore driller CNOOC, which opted for the domestic A-share market after being booted out of New York following its inclusion on a blacklist created during Donald Trump’s administration.

While China’s domestic IPO market is expected to remain strong, with about 376 companies in the pipeline, a resurgence in US listings could see mainland lenders lose their top spots eventually.

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“I don’t think we’ll necessarily see Chinese names topping the top slots on the league table next year,” Wang said. “For one, it’s been difficult for foreign banks to do the leg work in mainland China with the border curbs, as investment banking divisions are mostly based in Hong Kong. They could regain some of that business as that changes.” BLOOMBERG