A-share market raises record high IPO funds in 2020: NBS
Published: Feb 28, 2021 09:33 PM
Individual investors watch market performance at a brokerage in Shanghai on Monday. Photo: Yang Hui/GT

Individual investors watch market performance at a brokerage in Shanghai on Monday. Photo: Yang Hui/GT

The A-share stock market in the Chinese mainland raised record high funding for IPOs in 2020 despite the impact of the coronavirus, official data showed. The trend, however, is not likely to continue this year, given the uncertainty arising from the external environment, analysts said.

Over the course of 2020, the Shanghai Stock Exchange and Shenzhen Stock Exchange raised 1.54 trillion yuan ($240 billion), up 188.3 billion yuan from 2019, data from the National Bureau of Statistics (NBS) showed on Sunday.

New listings of 394 A shares raised 474.2 billion yuan, up more than 90 percent compared with the 2019, the highest level in almost 10 years. The strong performance was mainly backed by the STAR Market, which accounted for 47 percent of the funds raised in the A-share market during the year.

A-share refinancing including public new share issues, private placements, allotments, preferred shares and convertible debt conversions totaled 1.07 trillion yuan, a decrease of 37 billion yuan.

Driven by epidemic control efforts in the mainland and the ongoing development of the STAR market, the Shanghai Stock Exchange ranked top in the world by deal volume in 2020, according to an EY report in December.

EY predicted that IPO activity in the A-share market in 2021 will be affected by numerous factors. Jacky Lai, assurance partner at EY Hong Kong, said that the world economy will resume growth in 2021 after the pandemic, but it is still the most variable factor. 

"In addition, the development of China-US relations after the election will affect the economies of the two countries. However, the full implementation of the registration-based system in China will change the ecosystem in the A-share market," Lai said.

"The 14th Five-Year Plan will support direct financing, which will have a positive impact on the capital market and IPO activities," according to Lai.

Global consulting firm PwC predicted that 430 to 490 IPOs will take place on the A-share market in 2021, raising 450 billion to 480 billion yuan.

Yang Delong, chief economist at Shenzhen-based First Seafront Fund Management Co, told the Global Times on Sunday that A-share funding activity may not be as strong this year as in 2020, and the money-making effect in the stock market is likely to diminish compared with 2020, but the funding scale won't decrease by a large amount.

"People are continuing to invest their savings in the capital market instead of the property market, where regulation has remained tight," said Yang.

In the January-February period this year, 242 funds were newly established with a total of 786.82 billion shares issued, a record high for this period of any year, according to financial data provider Wind.

In post COVID-19 period, the US stock market has shown signs of entering a bear run, which will impose constraints and uncertainties on China's domestic stock market. 

"The A-share market will encounter twists and turns amid the external environment," said Dong Dengxin, director of the Finance and Securities Institute at the Wuhan University of Science and Technology.

"Meanwhile, the ability of the A-share market to attract foreign capital will further increase this year," said Dong.

In 2021, China's stock market is expected to see inflows of foreign capital reaching 300 billion yuan, supporting further gains in the indices, according to Yang.