Tech IPOs Flourish in China Amid Tensions With U.S.

(Bloomberg) -- The makeup of China’s equity capital market is changing as it attracts more tech companies amid rising tensions with the U.S.

Technology listings account for about a third of the $38 billion raised through initial public offerings in the mainland this year -- their share growing more than three-fold since last year to 35% of the total, data compiled by Bloomberg show. That’s significantly cut into the share of finance firms, which has fallen to 3% from about 28% last year.

Shanghai’s Star board of tech start-ups, which is just over one year old, has quickly become one of the world’s top three IPO venues, with companies raising more than $19 billion on the exchange this year. China has also been accelerating its capital market reforms for IPOs, revamping rules for Shenzhen’s ChiNext board, at a time when the U.S. is taking steps to clamp down on Chinese listings and targeting Chinese-owned software.

The increasingly dominant position of technology “reflects macroeconomic and geopolitical realities,” said Brock Silvers, chief investment officer at Adamas Asset Management. “China is feverishly raising technology investment capital, in part to fuel growing competition with the U.S. and in part because the US has threatened to curtail China’s access to its capital markets,” he added.

The top five tech IPOs in China this year are all listed on Star board. Semiconductor Manufacturing International Corp. and Qi An Xin Technology Group Inc. have been the biggest listings so far, raising $7.5 billion and $806 million, respectively.

Of course, there are still plenty of financial firms awaiting approval to list in the mainland. China International Capital Corp. in July tripled the offer size of its planned A-share listing to up to 1.44 billion shares, while Shanghai Rural Commercial Bank is also targeting a Shanghai listing. Ant Group, the parent of China’s largest mobile payment company, has hired two brokerages to advise on its listing in the city.

The growth in tech listings is making Chinese stock exchanges “relevant and attractive” for global investors, many of whom are looking for high-growth tech stocks that can weather any economic cycle, said Khiem Do, head of Greater China Investments at Barings.

UPCOMING LISTINGS:

• Xpeng Motors
  • New York Stock Exchange
  • Filed Aug. 7
  • Credit Suisse, JPMorgan, Bank of America
• Nongfu Spring
  • Hong Kong stock exchange
  • Size $1b
  • Gauging investor demand
  • CICC, Morgan Stanley
• Kakao Games Corp.
  • South Korea exchange
  • Size up to $321m
  • Gauging investor demand Aug. 26-27, pricing Aug. 31
  • Korea Investment, Samsung Securities
• Gland Pharma Ltd.
  • India stock exchanges
  • Filed July 10
  • Citi, Haitong, Nomura, Kotak

More ECM transactions we are following:

• Ayala Land’s AREIT Inc. obtained approval to set up and file with SEC for a 3-year shelf registration of up to 15b pesos of debt securities, according to a Philippine stock exchange filing
• JW (Cayman) Therapeutics Co. Ltd. files pre-listing documents with the Hong Kong stock exchange, according to a filing dated Aug. 14
• Lynas Corp. announced a pro-rata accelerated non-renounceable entitlement offer
• Converge ICT Solutions Inc. is planning to pre-market its $641 million IPO in September, according to IFR

See also:

• Asia ECM Weekly Agenda
• IPO data
• U.S. ECM Watch
• EU ECM Watch
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