China could be the world's biggest market for initial public offerings this year, according to advisory and accounting group Deloitte.
In a new report, Deloitte says the total number of listings this year in China is already double the figure for all of 2009, and the total capital raised is 1.5 times that in all of 2009.
So far this year, 192 companies have listed in Shanghai and Shenzhen, including the ChiNext board, raising a total of almost 300 billion yuan (HK$343.61 billion).
Deloitte said the surge in listings partly reflected the fact that the market was subdued last year, with no listings in the first half. It also reflected the launch of the ChiNext board in Shenzhen in the last quarter of 2009, attracting a host of small- and medium-sized enterprises to raise money.
Manufacturing companies made up the bulk of this year's A-share listings, accounting for 44 per cent, followed by telecommunications and technology companies with 26 per cent, according to Deloitte, although one of the main drivers of the expected wave of listings for all of 2010 will be China's financial sector.
Now that the four major state-owned banks have all completed IPOs, local commercial banks and rural co-operatives are also interested in China listings. Candidates include Bank of Shanghai, Bank of Wenzhou and Bank of Chongqing.
Deloitte warned that these Chinese financial institutions also carried bigger risks than state-owned banks in terms of their capital adequacy ratios and loan quality. But it said stress tests and earnings reports from the first quarter of 2010 showed that government efforts to cool the property sector had not had a material impact on earnings.
Deloitte said institutions that had listed had seen their balance sheets improve significantly, even outperforming some peers. In the first quarter of this year, the 14 banks trading on the A-share market saw net profits increase 31.65 per cent year on year on average, while their non-performing-loan ratios dropped 0.18 per cent to 1.4 per cent.
If the international board of the Shanghai stock exchange successfully launches this year, it could also attract listings from foreign and H-share companies.
Deloitte said the Hong Kong market, which has seen 41 listings so far this year, was unlikely to match 2007's full-year total of 87, but the total amount raised could still exceed the US$37 billion raised in 2007.
A capital year
This sum, in US dollars, was raised by listings in Hong Kong in 2007 and is likely to be exceeded this year: $37b