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Transcript of Cn Audit IPOMkt2012Review2013Outlook 080113
©2013 Deloitte Touche Tohmatsu
National Public Offering GroupDeloitte China
31 December 2012
Hong Kong and Chinese Mainland IPO Markets2012 Review and 2013 Outlook
©2013 Deloitte Touche Tohmatsu
In 1H/2012, the capital market stumbled against the backdrop of the following dismal and jittery events:
2
1• Mass credit downgrade in Eurozone countries
2• Weakening of China’s economy with growth target cut to
7.5%
3• Corporate governance issues of listed companies, sharp
earnings decline among newly listed issuers
4• Anxiety over election result in Greece
5• Sluggish recovery of U.S. economy
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
©2013 Deloitte Touche Tohmatsu
Hong Kong’s IPO market plummeted in 1H/2012
32 new listings, raising HK$30.6 billion (↓84%)
(1H/2011: 38 new listings, raising HK$187.2 billion*)
The WORST half-year performance in terms of
proceeds raised since financial tsunami in 2009
3 Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
Source: Hong Kong Stock Exchange (HKEx), Deloitte Analysis; * including proceeds raised from the offerings of Hui Xian REIT, and the international offering of Glencore International Plc. in 2011
©2013 Deloitte Touche Tohmatsu
16
3751
23
61
83
24
24
25
5462
57
0
10
20
30
40
50
60
70
0
20
40
60
80
100
SH Main Board SZ SME Board ChiNext
Proceeds Raised
No.
of I
POs
Proceeds Raised in 1H/2012 Proceeds Raised in 1H/2011
Reduced momentum in Mainland’s IPO market in 1H/2012
104 new listings, raising RMB72.6 billion (↓58%)
(1H/2011: 167 new listings, raising RMB173 billion)
4
Source: China Securities Regulatory Commission (CSRC), Deloitte Analysis
(RMB billion)
1H/2012 1H/2011
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
1H/2012 1H/2011 1H/2012 1H/2011
©2013 Deloitte Touche Tohmatsu
In 2H/2012, market sentiment gradually picked up upon the following compelling events:
5
6• Monetary easing by People’s Bank of China in lowering
reserve requirement ratio and cutting borrowing rate
7• QE3 of U.S. Federal Reserve (Fed), Outright Monetary
Program of European Central Bank
8• Upbeat China economic statistics point to recovery
9• Successful transition to new leadership in China, positive market
anticipation on economic policies after Central Economic Work Conference
10• Continuation of U.S. administration
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
©2013 Deloitte Touche Tohmatsu
A lackluster market for Hong Kong’s IPOs in first three quarters of 2012 but a rebound in last quarter
6Source: HKEx, Deloitte Analysis
(2011: 90 new listings, raising HK$271.4 billion*)
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
62 new listings, raising HK$89.8 billion (↓67%)
The WEAKEST annual performance in terms of
proceeds raised since the financial tsunami in 2009. However, market sentiment has been picking up since mid-September with the economic stimulus programs from
the U.S. and Europe. Driven by the improved market sentiment and liquidity, proceeds raised in the Q4
took up over 50% of the total
proceeds raised in 2012.
©2013 Deloitte Touche Tohmatsu
In 2012, Mainland’s IPO market was mired in a deep malaise along with the cooling economy
154 new listings, raising RMB103.4 billion (↓63%)
(2011: 281 new listings, raising RMB282.4 billion)
7
Source: CSRC, Deloitte Analysis
(RMB billion)
25
55
74
38
115
128
33
3535
101 102
79
0
20
40
60
80
100
120
0
20
40
60
80
100
120
140
SH Main Board SZ SME Board ChiNext
Proceeds Raised
No.
of I
POs
Proceeds Raised in 2012 Proceeds Raised in 2011
2012 2011 2012 2011 2012 2011
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
©2013 Deloitte Touche Tohmatsu
178.8 174.3
97.8 89.8 86.058.9
020406080
100120140160180200
New York StockExchange**
NASDAQ** Tokyo StockExchange
Hong Kong StockExchange
Shenzhen StockExchange
Bursa Malaysia
Market sentiment at trough resulting in disappointing IPO deal flow and volume in 2012
Hong Kong ranked no. 4 in terms of funds raised globally,
behind those of NYSE, NASDAQ, Tokyo Stock Exchange, but ahead of
Shenzhen Stock Exchange, Bursa Malaysia, and
Shanghai Stock Exchange.
8
(HK$ billion) IPO Proceeds Raised from Key Global Exchanges for 2012
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
51 Listings55 Listings80 Listings 62 Listings 129 Listings 16 Listings
Source: HKEx, Deloitte Analysis** Exclude proceeds from close-end investment companies, close-end funds and special purpose acquisition companies (SPACs)
©2013 Deloitte Touche Tohmatsu
Hong Kong
9
Overview of IPO market – 2012IPO activities lost steam amid market downturn
7 7 11
34
13 1421
47
10
2318
2615
10 12 130 0
2
3
02
2
3
3
23
5
34 3 2
0
50
100
150
200
250
300
350
0
10
20
30
40
50
60
2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4*
Proceeds RaisedN
o. o
f IPO
s
HK MB IPOs HK GEM IPOs Proceeds from IPOs (HK$ billion)Slowest Q4 deal flow since financial tsunami down from 31 to 15 y-o-y (↓52%)
MB IPO activities were in droughtin May and September
• Market choppiness stymied IPO plans, leading to a no-show of IPO on the Main Board (MB) in May and September 2012, the worst situation for nearly a decade.• An uptick in market condition since mid-
September upon liquidity boost from another round of quantitative easing from the Fed and stalled IPO market driving the return of new and larger listings since October.
Substantially fewer listing applications accepted by HKEx since 2009
• 114 listing applications for the MB and Growth Enterprise Market (GEM) were received during 2012, substantially down 44% y-o-y from 203.• Only 49 active applications are being
processed, displaying a downward trend from 63, a y-o-y plunge of 22%.
Lapsed, rejected and withdrawal of listing applications at record high since
2004
• In 2012, 52 applications were lapsed without renewal, decreased from 64, or 19% y-o-y. 8 applications were rejected, and 12 applications were withdrawn. Figures have risen from 3, or 167%; and 1, or 1,100% y-o-y respectively.
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 OutlookSource: HKEx, Deloitte Analysis
©2013 Deloitte Touche Tohmatsu
4 5 10 1 6 9 11 12 9 6 5 11 8
24 30
5258 46 48
35 26 26 2819 18
15
36
2925 33 30
4340
3114
2526
22
0
20
40
60
80
100
120
140
160
180
0102030405060708090
100
2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012Q4*
Proceeds RaisedN
o. o
f IPO
s
SH MB IPO SZ SME ChiNext IPO Proceeds from IPO
The Chinese MainlandOverview of IPO market – 2012IPO deal flow braked amid fading stock market
10
IPO activities were muted
• Chilled market confidence as manifested by indices plunging through various so-called “rock bottom” levels.
• Significant slowdown of listing application review observed since May. No offering review meeting was held in August, November and December and only one in September and October respectively.
Number of applications were at all-time high
• 851 listing applications were in the queue for the Shanghai (SH) MB, SME Board and ChiNext as of 28 December 2012. Among these, 22 applications were suspended and 2 were withheld for further actions.
• In 2012, another 67 applications were either withdrawn or rejected.
90 IPOs are waiting in the wings
• As of 28 December 2012, 90 applications, which have passed the offering review meeting, were awaiting for listing.
• 739 active applications were under processing.
Source: CSRC, Deloitte Analysis. * SH MB IPO: 1; SZ SME Board IPO: 3; ChiNext IPO: 1.
The weakest Q4 since resumption of IPOs in Q3 of 2009. Deal flow was down from 48 to 5 y-o-y (↓90%) and deal volume tripped from RMB56b to RMB3b y-o-y (↓95%)
(RMB billion)
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
©2013 Deloitte Touche Tohmatsu11
24
60 92
18 19
1 1 4
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
SH MB SZ SME ChiNextPassed Failed Review suspended Review called off
(Pass rate)
During 2012, 219applications were submitted to the Offering Review Committee.
Among these, 176 passed;
37 failed; 5 reviews were
called off; and 1 review was suspended.
Another 2 companies decided to terminate their IPO plans after passing the offering review meetings.
The overall pass rate was
80%.
The Chinese MainlandOverview of IPO market – 2012Pass Rate of Offering Review Meeting
Source: CSRC, Deloitte Analysis
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
©2013 Deloitte Touche Tohmatsu
68%
27%
5%
Number of IPOs byLocation of Issuer
Chinese Mainland Hong Kong International
Hong Kong
12
Overview of IPO Market – 2012Mainland companies continued to be key drivers of new listings
International Listings Shrunk Substantially
• Deal activities were relatively quiet and declined sharply by 67% to three.• IPO volume shattered and dropped 97%
to HK$6.27 billion.• List of authorised jurisdictions for listing
was expanded with the addition of Delaware, U.S. and the Republic of Korea.
Mainland Companies Dominated in All Respects
• 42 out of 62 deals were from the Chinese Mainland, up from 57% to 68% y-o-y• IPO volume picked up to HK$81.1 billion,
representing a 90% (2011: 40%) rise in the proceeds raised in the market.
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 OutlookSource: HKEx, Deloitte Analysis
©2013 Deloitte Touche Tohmatsu
Overview of the Two IPO Markets – 2012Both IPO average first-day returns dropped
13
-9%
-10%
-11%
-20%
-27%
33%
39%
42%
59%
87%
-40% -20% 0% 20% 40% 60% 80% 100%
HK IPO Top Five Best/ Worst Performers
Pegasus Entertainment
Dynam Japan
Qualipak
Xiwang Special Steel
China City Railway
Sunley Holdings
Vision Fame
Juda International
China AssuranceFinance
Haitian Hydropower
-14%
-15%
-17%
-17%
-26%
94%
103%
138%
221%
627%
-50% 50% 150% 250% 350% 450% 550% 650%
A-share IPO Top Five Best/ Worst Performers
Ningbo Cixing
Yinbang Clad Material
Jiangsu Yuxing Film Technology
Chengdu Leejun
Jiajia Food
Bluedon
Loncin Industries
Epoxy Base Electronic Material
China Molybdenum
Zhejiang Shibao
Hong Kong
• Average first-day performance was +6.0%, which was higher than the inflation. On a y-o-y comparison, it has increased by 0.1% from +5.9%.
• Top and worst IPO performers on the listing days were both from the GEM, at +87% and -27% respectively.
Chinese Mainland
• Average first-day performance increased by 5.2% from a return of +21.4% to +26.6% y-o-y.
• Both top and worst IPO performers on the listing days were from the SZ SME Board. They generated first-day returns at +627% and -26% respectively.
Source: HKEx, Deloitte Analysis
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
©2013 Deloitte Touche Tohmatsu
16%
35%
49%
P/E Multiples of HK IPOs
x < 5 times 5 times < x < 10 times x > 10 times
Market valuation took a drubbing
14
19%
73%
8%
P/E Multiples of A-share IPOs
x < 20 times 20 times < x < 40 times x > 40 times
P/E multiples of Hong Kong new listings hurt by falling market valuation
• 29 deals or 51% of the new listings had single-digit P/E multiples.• Health care & pharmaceutical sector topped the
league with 18 times of average historical multiples when listed.
P/E multiples of A-share new listings plunged upon regulatory policies of lowering
exceptionally high P/E ratios
• 112 deals or 73% of the listings had 20 to 40 times P/E multiples.• Companies from the technology, media and
telecommunications sector ranked top with about 62 times multiples when listed.
Overview of the Two IPO Markets – 2012
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
Source: HKEx, Deloitte Analysis
©2013 Deloitte Touche Tohmatsu
Overview of the Two IPO Markets – 2012Valuation of A-share market sloped closer to Hong Kong
15 Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
2011Q4
2012Q1
2012Q2
2012Q3
2012Q4
HKEx - MB 9 13 16 18 17 15 16 17 12 12 9 10 10 9 9 11HKEx - GEM 13 34 33 39 43 29 33 31 26 24 20 22 18 17 17 18SH MB 19 25 24 29 28 18 20 22 23 16 14 13 14 12 11 12SZ SME 25 36 35 47 41 32 40 45 36 31 27 23 23 23 21 22
0
5
10
15
20
25
30
35
40
45
50Av
erag
e P/
E M
ultip
les
Source: HKEx
11x
(Times)
©2013 Deloitte Touche Tohmatsu
Hong Kong
IssuerProceeds
Raised (HK$ million)
2012
1. The People's Insurance Company (Group) of China 27,607
2. Haitong Securities 14,383
3. Inner Mongolia Yitai Coal 7,009
4. Sunshine Oilsands 4,487
5. Shanghai Fosun Pharmaceutical 3,966
Chinese Mainland
IssuerProceeds
Raised(RMB million)
2012
1. China Comm. Construction 5,000
2. Citic Heavy Industries 3,199
3. Solareast 2,150
4. Ci Xing 2,135
5. Ao Kang 2,066
2011
1. Sinohydro. Group 13,500
2. Sinovel Wind 9,459
3. Power Diversity Automobile 6,300
4. Founder Securities 5,850
5. China Hainan Rubber 4,708
2011
1. Glencore International 77,746
2. PRADA S.p.A. 19,227
3. Shanghai Pharmaceuticals 16,014
4. Chow Tai Fook Jewellery Group 15,991
5. CITIC Securities 14,247
Dwindling appetite dried market in all dimensions and top five IPOs shrunk
16
Overview of the Two IPO Markets – 2012
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
Source: HKEx, CSRC, Deloitte Analysis
©2013 Deloitte Touche Tohmatsu
40%
5%10%10%
20%
15%
Hong Kong London Singapore Spain NYSE Shanghai
Two of the global largest IPOs came from Hong Kong, nil from Mainland
17
Overview of the Two IPO Markets – 2012
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
15.716.016.016.4
19.222.3
29.534.0
42.477.7
0102030405060708090
New China Life Insurance (HKEx/SH MB)Chow Tai Fook (HKEx)Shanghai Pharmaceutical (HKEx)Sinohydro Group (SH MB)Prada (HKEx)Kinder Morgan (NYSE)HCA Holdings (NYSE)Bankia (Spain)Hutichison Port Holdings Trust (Singapore)Glencore International (HKEx/London)
IPO Proceeds
20%
10%
20%10%
10%
5%
5%
10%
10%
Hong Kong London Malaysia Brazil NASDAQ NYSE Mexico Japan Frankfurt
Source: HKEx, London Stock Exchange, NASDAQ, Tokyo Stock Exchange, Singapore Exchange, Renaissance Capital and Deloitte Analysis and exclude proceeds from SPACs
14.214.414.515.116.5
25.527.6
32.065.8
124.5
0 20 40 60 80 100 120 140
MegaFon (London)Haitong Securities (HKEx)
Telefonica Deutschland (Frankfurt)BTG Pactual (Brazil)
IHH Healthcare (Malaysia)FELDA Global Ventures (Malaysia)
PICC (HKEx)Santander Mexico (NYSE/Mexico)
Japan Airlines (Tokyo)Facebook (NASDAQ)
IPO Proceeds
of the largest are
listed/dually listed in Hong
Kong
5
of the largest are
listed in Hong Kong
2
Year 2012
Year 2011
(HK$ billion)
(HK$ billion)
©2013 Deloitte Touche Tohmatsu
Hong KongIPO Deal Size AnalysisIn 2012, five deals raised an aggregate of HK$57 billion, which accounted for 64% of the total funds raised during the year.
18
62
3
2
7
1
Total funds raised: HK$295b• CITIC Bank• China Railway Group• Country Garden• SOHO China• Sino-Ocean Land• Fosun International• Alibaba.com• Sinotrans Shipping• Sinotruk• Belle International • China Molybdenum
Total funds raised: HK$66b
• China Railway Construction
• Want Want China
Total funds raised: HK$248b• Minsheng Banking
Corporation• China Pacific
Insurance• China Longyuan Power• Sands China• Metallurgical
Corporation of China• Wynn Macau• Glorious Property• Sinopharm Group• China Zhongwang• Longfor Properties
Total funds raised: HK$449b• AIA Group• Agricultural Bank of
China• RUSAL• Zoomlion• Chongqing Rural
Commercial Bank• Rongsheng Heavy
Industries• Xinjiang Goldwind
Science & Technology
Total funds raised: HK$270b• Glencore• PRADA• Shanghai
Pharmaceuticals• Chow Tai Fook• CITIC Securities • MGM China• Hui Xian REIT• New China Life
Insurance• Samsonite• Sun Art Retail Group• HKT
Total funds raised: HK$90b
• PICC• Haitong Securities• Inner Mongolia Yitai
Coal• Sunshine Oilsands• Shanghai Fosun
Pharmaceutical
0%10%20%30%40%50%
60%70%80%90%
100%
2007 2008 2009 2010 2011 2012
Deal Size of HK MB IPOsMega (>US$1b) Large (US$1b>x>US$0.5b) Medium (US$0.2b>x>US$0.5b) Small (<US$0.2b)
112
11 IPOs raised HK$164b
2 IPOs raised HK$28b
10 IPOs raised HK$170b
7 IPOs raised HK$320b
11 IPOs raised HK$208b
5 IPOs raised HK$57b
112 10 7
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 OutlookSource: HKEx, Deloitte Analysis
©2013 Deloitte Touche Tohmatsu
1.9
1.5 1.6 1.6
1.1 1.0
0.0
0.5
1.0
1.5
2.0
2.5
0
20
40
60
80
100
120
140
2007 2008 2009 2010 2011 2012
Average Proceeds Raised
Proc
eeds
Rai
sed
Deal Size of HK MB New IPOs (excluding US$1 billion mega-deals)
Large (US$1b>x>US$0.5b) Medium (US$0.2b>x>US$0.5b) Small (<US$0.2b) Average
7%
Hong KongIPO Deal Size AnalysisAverage deal size was HK$1,015 million for MB and HK$94 million for GEM
19
(HK$ billion) (HK$ billion)
67 d
eals • HK$
131billion 25
dea
ls • HK$
37billion 50
dea
ls • HK$
78 billion 80
dea
ls • HK$
128billion 58
dea
ls • HK$
64 billion 46
dea
ls • HK$
47billion
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 OutlookSource: HKEx, Deloitte Analysis
©2013 Deloitte Touche Tohmatsu
Total funds raised: RMB191b
• China State Construction• Metallurgical Corporation of
China • China CNR Corporation• China Shipbuilding Industry• China Merchants Securities• Everbright Securities
Total funds raised: RMB480b
• Agricultural Bank of China• China Everbright Bank• Hua Tai Securities• China First Heavy
Industries• China XD Group• Ningbo Port• China National Chemical
Engineering• Hepalink• Kelun Pharmaceuticals
Total funds raised: RMB282b
• Sinohydro• Sinovel Wind Group• Pang Da Automobile Trade• Founder Securities
Total funds raised: RMB103b
• China Communications Construction
• Citic Heavy Industries • Solareast• Ci Xing• Ao Kang• BROS
The Chinese MainlandIPO Deal Size AnalysisMajorities were smaller deals with the six largest ones raising an aggregate of RMB17 billion, which accounted for merely 16% of the total funds raised.
20
38
31
Source: CSRC, Deloitte Analysis
0%10%20%30%40%50%60%70%80%90%
100%
2009 2010 2011 2012
Deal size of A-share IPOs
Mega (>RMB5b) Large (RMB5b>x>RMB1b) Medium (RMB1b>x>RMB0.5b) Small (<RMB0.5b)
6 IPOs raised RMB123b 9 IPOs raised RMB143b 4 IPOs raised RMB35b 6 IPOs raised RMB17b
6
9 4 1
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
©2013 Deloitte Touche Tohmatsu
The Chinese MainlandIPO Deal Size AnalysisAverage deal size was RMB1.3 billion for MB, RMB635 million for SME Board, and RMB475 million for ChiNext respectively.
21
0.7
1.0 0.9
0.6
0.0
0.2
0.4
0.6
0.8
1.0
1.2
0
50
100
150
200
250
300
2009 2010 2011 2012
Average Proceeds Raised
Proc
eeds
Rai
sed
Deal size of A-share New IPOs (Excluding RMB$5 billion mega-deals)Large (RMB5b>x>RMB1b) Medium (RMB1b>x>RMB0.5b) Small (<RMB0.5b) Average
28%
(RMB billion) (RMB billion)
93 d
eals • RMB
68billion
338
deal
s • RMB
338billion
277
deal
s • RMB
247billion
153
deal
s • RMB
98 billion
Source: CSRC, Deloitte Analysis
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
©2013 Deloitte Touche Tohmatsu
Hong KongEighty percent of the IPOs were priced at and below the mid-point with almost half at the low-end of the range.
8%
12%
38%
42%
IPO Pricing in 2012
10%
15%
30%
45%
IPO Pricing in 2011
Top of the IndicativeRange
Above the Mid-Point ofthe Indicative Range
At and Below the Mid-Point of the IndicativeRange
Bottom of theIndicative Range
22 Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 OutlookSource: HKEx, Deloitte Analysis
©2013 Deloitte Touche Tohmatsu
Hong Kong Liquidity retreated amid poor market visibility
23
38% of the MB IPOslaunched were under-subscribed.
For the well-received ones,
73 % of themwere over-subscribed for
less than 5 times.
0
500
1,000
1,500
2,000
2,500
20122011
No.
of T
imes
of O
ver-
subs
crip
tion
Best-received IPOs in terms of Over-subscription Rate
2,179x
57x
(2011: 31%)
(2011: 43%)
Milan Station China Machinery
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
Source: HKEx, Deloitte Analysis and for Main Board listings only
©2013 Deloitte Touche Tohmatsu
The Chinese MainlandIPO over-subscription rate remained astonishing amid poor sentiment and market slowdown
24
All IPOs were over-subscribed.
42 % of them were over-subscribed for
over 100 times.
742x
479x
0
100
200
300
400
500
600
700
800
20122011
No.
of T
imes
of O
ver-
subs
crip
tion
Best-received IPOs in terms of Over-subscription Rate
Source: CSRC, Deloitte Analysis
Zhejiang Shibao
Shenke Slide Bearing
(2011: All)
(2011: 47%)
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
©2013 Deloitte Touche Tohmatsu
20%
8%
3%
23%11%
16%
16%
3%
2012 Energy & Resources
Financial Services
Health Care &Pharmaceutical
Manufacturing
Property
Retail & Consumer Business
Technology, Media &Telecommunications (TMT)
Others
14%
10%
6%
22%6%
32%
8%2%
2011
Hong Kong
25
Number of IPOs by IndustryManufacturing sectors topped the ranking
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 OutlookSource: HKEx, Deloitte Analysis
©2013 Deloitte Touche Tohmatsu
The Chinese MainlandNumber of IPOs by IndustryManufacturing sector dominated IPO activities of the A-share market
26
4%1%
6%
46%
3%
14%
23%
3%
2012
Energy & Resources
Financial Services
Health Care &PharmaceuticalManufacturing
Property
Retail & ConsumerBusinessTMT
Others
4%1%8%
52%2%
14%
18%1%
2011
Source: CSRC, Deloitte Analysis
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
©2013 Deloitte Touche Tohmatsu
24.7%
47.5%
4.7%
10.5%
4.6%6.5%
1.3%0.2%
Energy & Resources Financial Services Health Care & Pharmaceutical Manufacturing Property Retail & Consumer Business TMT Others
38.0%
12.1%6.7%4.1%
5.5%
29.7%
3.9%
22.17
42.62
4.19
9.40
4.07
5.94
1.28
0.16
0 10 20 30 40 50
Energy & Resources
Financial Services
Health Care & Pharmaceutical
Manufacturing
Property
Retail & Consumer Business
TMT
Others
2012
27
Hong KongProceeds from financial services sector took up nearly half of the proceeds raised
103.02
32.72
18.27
11.08
15.03
80.66
10.59
0.03
0 20 40 60 80 100 120
Energy & Resources
Financial Services
Health Care & Pharmaceutical
Manufacturing
Property
Retail & Consumer Business
TMT
Others
2011
(HK$ billion)
(HK$ billion)
Energy & Resources
Well Ahead of Others with Glencore Offering
Financial Services Led with Haitong
and PICC Offerings
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
Source: HKEx, Deloitte Analysis; including proceeds raised from the offerings of Hui Xian REIT, and the international offering of Glencore International Plc. in 2011
©2013 Deloitte Touche Tohmatsu
3.9%4.5%
6.5%
46.8%6.7%
18.3%
13.0%0.3%
3.9%1.7%5.3%
43.6%
7.3%
15.3%
20.6%
2.3%
Energy & Resources Financial Services Health Care & Pharmaceutical Manufacturing Property Retail & Consumer Business TMT Others
28
4.01
1.74
5.49
44.98
7.50
15.97
21.33
2.41
0 10 20 30 40 50
Energy & Resources
Financial Services
Health Care & Pharmaceutical
Manufacturing
Property
Retail & Consumer Business
TMT
Others
2012
The Chinese Mainland
11.04
12.79
18.47
132.01
18.91
51.62
36.64
0.98
0 20 40 60 80 100 120 140
Energy & Resources
Financial Services
Health Care & Pharmaceutical
Manufacturing
Property
Retail & Consumer Business
TMT
Others
2011
(RMB billion)
(RMB billion)
ManufacturingWell Ahead of
Others
Manufacturing Topped the
Rank
Manufacturing sector was driving 44% of the total proceeds
Source: CSRC, Deloitte Analysis
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
©2013 Deloitte Touche Tohmatsu
Hong KongOutlook - challenges overshadowed the market
29
HK IPO Market
Eurozone worrieswhether the beleaguered countries could turnaround or even would get worsened; right policies to energize the contracting economy
Looming U.S. fiscal cliff
how this will play out and affect the U.S. economic recovery
Pace of China’s recovery
direction and magnitude ofeconomic stimulus policy
Keen competitions from other bourses in the
regionHKEx is at the crossroads
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
©2013 Deloitte Touche Tohmatsu
The Chinese MainlandOutlook - challenges clouding the market
30
A- share IPO
Market
Worsening corporate earnings
Cooling down of Chinese economy
Ongoing unlock of large volume of restricted
shares
The “three high” issue*
Liquidity drain pressure due to astonishing IPO backlog
*High P/E, proceeds and offer price
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
©2013 Deloitte Touche Tohmatsu
The Chinese MainlandSignificant policies, further new procedures are expected to be launched in early 2013, bringing further changes to the market
31
A-share Market
Transparency of Listing Process
Reduction of Securities
Transaction Costs
Tightened Delisting
Rules
IPO Pricing Reform
IPO Approval
Pace
Speed Up Approval of
QFIIs
Invitation to five to 10 individuals investors to participate in pricing procedures
Details of responsibilities for issuers, intermediary institutions, legal firms, accounting firms and rating agencies
Regulate deal flows to prevent significant drain of market liquidity
Increase of US$ and RMB QFII quotas to US$80 billion and RMB270 billion, respectively
Lower requirements for QFII application
Delisting of issuers having negative net asset values or annual operating income of less than RMB10 million for three consecutive years
Three rounds of securities transaction cost cut to 0.02%
Details of listing process and applications under review
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
©2013 Deloitte Touche Tohmatsu
Hong KongOutlook – key listing trends
Mainland Enterprises “Go Global”• Mainland POEs• Relaxation of listing
requirements of H-share under CEPA* IX•Market reform of B-share –
switching from B-share listing to H-share listing in Hong Kong• H-share offerings of A-share
companies
• Support outbound M&A activities
RMB Internationalisation• Relaxation of H-share in raising RMB in Hong
Kong• RMB-denominated IPOs• RMB-denominated exchange traded funds
tracking Hong Kong stocks
Streamlining of Secondary Listing Process• International listing• Secondary listing or listing by introduction
HKEx’s Acquisition of London Metal Exchange• International capital market for mining and
natural resources companies
Listing of Home-grown Brands• Family business expansion for increased brand
recognition• Wealth management to pass onto the second
generation
32
* Closer Economic Partnership Arrangement (CEPA)
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
©2013 Deloitte Touche Tohmatsu
The Chinese MainlandOutlook – key listing trends
“New Third Board” -over-the-counter market
Western region development
Seven strategic emerging sectors
Priority development of cultural, and agricultural, forestry, fishing and livestock industries
33
State policy driven processAlign with State development
plan
Areas where government funding will flow, and where
private funding is expected and priority business sectors will
advance
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
©2013 Deloitte Touche Tohmatsu
Hong KongOutlook - sector allocation for IPOFinancial services, property, and retail & consumer sectors will be the foci.
34
Fina
ncia
l Ser
vice
s –
Ban
ks &
Se
curit
ies
Firm
s
Meet capital and liquidity ratio alongside with business expansion
Accelerate growth from expansion of QFII/ RQFII quota
Expand products, business and international coverage In
fras
truc
ture
-rel
ated
–Pr
oper
ty
Stimulate economy through tremendous infrastructure investment and boosting new urbanisation
Macro-economic control on this sector is expected to have bottomed out
Overall property market sentiment gets stabilised
Funding needs for project development
Ret
ail &
Con
sum
er B
usin
ess
Income re-distribution initiatives to even and increase average income per capita
Funding for M&A activities to fuel expansion as valuation gets reasonable
Tap into the Mainland market, the second largest economy and luxury goods consumption market
“Going-out”
“New urbanisation”
“Well-off society”
2015Year
3rd Year of 12th Five-Year Plan
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
©2013 Deloitte Touche Tohmatsu
The Chinese MainlandOutlook - sector allocation for IPOStrategic emerging industries under the 12th Five-Year Plan are the hot picks.
35
Agricultural, forestry,
fishing and livestock
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
©2013 Deloitte Touche Tohmatsu
Around70-80 companies will be listed during the year,
raising approximately HK$100-150 billion.
Hong Kong’s IPO Market in 2013
36
(2012: HK$89.8 billion, ↑11% - 67%)
Growth surges in China and the U.S removes the overcast in the market.A new chapter in the development for Hong Kong with booming pipelines will begin.
We are cautiously optimistic about the IPO deal flow and volume for 2013.
(2012: 62 new listings, ↑13% - 29%)
Source: HKEx, Deloitte Estimate
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
©2013 Deloitte Touche Tohmatsu
Around150 companies will be listed by the end of 2013,
raising approximately RMB100 billion.
The Chinese Mainland’s IPO Market in 2013
Source: CSRC, Deloitte Estimate
37
Market transformation develops alongside with tight liquidity and weak corporate earnings will stem IPO activity and good valuation.
The pipeline is fully stocked and the IPOs are expected to go full steam ahead as soon as the market confidence restores.
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 OutlookHong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
(2012: 154 new listings, ↓2.6%)
(2012: RMB103.4 billion, ↓3%)
©2013 Deloitte Touche Tohmatsu
Deloitte’s Market Share in Hong Kong IPO in 2012
38
32%
68%
Deloitte Non-Deloitte
Number of IPOs IPO Proceeds Raised
29%
71%
Deloitte Non-Deloitte
Source: HKEx, Deloitte Analysis
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
©2013 Deloitte Touche Tohmatsu39
Deloitte is their reporting accountantMajor deals completed in Hong Kong in 2012
Sunshine Oilsands Ltd.
The company is the largest holder of non-partnered oil sands leases by area in the Athabasca oil sands region and Canada. It is the largest international listing in 2012 on HKEx, raising HK$4.5 billion.
Jiangnan Group Ltd.
It is a leading manufacturer of wires and cables for power transmission, distribution systems and electrical equipment in China.
Haitong Securities Co., Ltd.
It is a leading full-service securities firm in China with an integrated business platform, extensive branch network and substantial customer base. It raised HK$14.4 billion proceeds through its H-share listing.
Wonderful Sky Financial Group Holdings Ltd.
The company is principally engaged in the provision of financial public relations services in Hong Kong.
Christine International Holdings Ltd.
The company is a leading bakery chain operator in China. It offers a range of bakery products through an expansive multi-channel retail network, including 898 retail outlets in 22 cities.
Trigiant Group Ltd.
The group is one of the leading manufacturers engaged in research, development, sales of RF coaxial cables series and other related accessories for use in mobile communications andtelecommunications equipment in China.
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
©2013 Deloitte Touche Tohmatsu40
Deloitte is their reporting accountantMajor deals completed in Hong Kong in 2012
China Nonferrous Mining Corporation Ltd.
The company is a leading fast growing and vertically integrated copper producer that focuses on mining, ore processing, leaching, smelting and sale of copper. It is based in Zambia.
China Yongda Automobiles Services Holdings Ltd.
It is a leading passenger vehicle retailer and comprehensive service provider in China. It focuses on offering automobiles from luxury and ultra-luxury brands.
Wanguo International Mining Group Ltd
The company is principally engaged in the business of mining, ore processing and sale of the concentrates products in China.
CIFI Holdings (Group) Co. Ltd.
The company is engaged in the property development, property investment and property management business in China.
Casablanca Group Ltd.
The company is one of the leading branded bedding products companies in China and Hong Kong.
Zhengzhou Coal Mining Machinery Group Company Ltd.
It is a leading comprehensive coal mining and excavating equipment manufacturer in China. Its H-share IPO raised HK$2.3 billion.
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
©2013 Deloitte Touche Tohmatsu
Deloitte is their reporting accountantRecently completed A-share listings
41
China Molybdenum Co., Ltd.
It is specialized in mining, dressing, smelting and processing of molybdenum and tungsten.
Universal Scientific Industrial (Shanghai) Company Ltd.
It is a global leader in providing services and solutions in electronic product design and manufacturing.
Beijing Cuiwei Tower Company Ltd.
The company is principally engaged in the development and operation of department store chain on the Chinese Mainland.
Agricultural Bank of China Ltd.
It is one of the four state-owned banks in China. Its IPO was the largest in the A-share market in 2009, raising RMB59.6 billion.
Great Wall Motor Company Limited
The company is engaged in the repair of motor vehicles, development and research, manufacturing and sales of vehicle parts.
Shandong Molong Petroleum Machinery Company Ltd.
The company is specialised in the design, research and development, processing, manufacturing and sales in China and petroleum machinery export.
Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
©2013 Deloitte Touche Tohmatsu42
Deloitte China at a Glance
Our China Practice• Over 10,000 people in 16 offices
• Serving one-third of all companies listed on the Hong Kong Stock Exchange
• Leading position in public offering services in key capital markets and was the reporting accountant for the global largest IPOs in both 2010 (Agriculture Bank of China) and 2011 (Glencore International Plc)
• Advising the Ministry of Finance in the Chinese Mainland on the development of international accounting standards and tax systems since 1993
We have achieved many industry firsts:• The first to co-sponsor a GEM listing on the
Stock Exchange of Hong Kong
• The first to sponsor a Hong Kong Main Board listing
• The first to pioneer the listing of RMB-denominated REIT (Hui Xian REIT)
• The first to bridge the gap between Japanese Generally Accepted Accounting Principles and the IFRS and assisted the Hong Kong IPO of the first Japanese company (SBI Holdings, Inc.) on the Hong Kong Stock Exchange
Our China Practice• Over 10,000 people in 16 offices
• Serving one-third of all companies listed on the Hong Kong Stock Exchange
• Leading position in public offering services in key capital markets and was the reporting accountant for the global largest IPOs in both 2010 (Agriculture Bank of China) and 2011 (Glencore International Plc)
• Advising the Ministry of Finance in the Chinese Mainland on the development of international accounting standards and tax systems since 1993
We have achieved many industry firsts:• The first to co-sponsor a GEM listing on the
Stock Exchange of Hong Kong
• The first to sponsor a Hong Kong Main Board listing
• The first to pioneer the listing of RMB-denominated REIT (Hui Xian REIT)
• The first to bridge the gap between Japanese Generally Accepted Accounting Principles and the IFRS and assisted the Hong Kong IPO of the first Japanese company (SBI Holdings, Inc.) on the Hong Kong Stock Exchange
Deloitte China National Public Offering GroupYour Winning Team for Listing on Capital Markets
Deloitte offices
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Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
©2013 Deloitte Touche Tohmatsu43 Hong Kong and Chinese Mainland IPO Markets - 2012 Review and 2013 Outlook
ContactsNational Public Offering Group
Edward AuCo-LeaderTel:+852 2852 1266Fax:+852 2815 8476Email:[email protected]
Patrick TsangCo-LeaderTel:+86 21 6141 1818Fax:+86 21 6335 0177/0377Email:[email protected]
Southern China
Clement Hung Deputy Regional Managing Partner, Southern ChinaTel:+852 2852 1056Fax:+852 2542 4225Email:[email protected]
Terence Cheung PartnerTel:+852 2852 6405Fax:+852 2541 3817Email:[email protected]
Northern China
Samuel WongAudit Leader of Northern China RegionTel:+86 10 8520 7288Fax:+86 10 8518 1218Email:[email protected]
Taylor LamPartnerTel:+86 10 8520 7126Fax:+86 10 8520 7494Email:[email protected]
Eastern China
Dick KayPartnerTel:+86 21 6141 1838Fax:+86 21 6335 0177Email:[email protected]
Anthony WuPartnerTel:+86 21 6141 1808Fax: +86 21 6335 0177/0377Email:[email protected]
©2013 Deloitte Touche Tohmatsu
About DeloitteDeloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/cn/en/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.
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As early as 1917, we opened an office in Shanghai. Backed by our global network, we deliver a full range of audit, tax, consulting and financial advisory services to national, multinational and growth enterprise clients in China.
We have considerable experience in China and have been a significant contributor to the development of China's accounting standards, taxation system and local professional accountants. We provide services to around one-third of all companies listed on the Stock Exchange of Hong Kong.
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