Prices on display at the Shenzhen Stock Exchange. The exchange raised 181 billion yuan ($28.6 billion) in 243 IPOs in 2011, according to the accounting firm Ernst & Young LLP. [Photo/China Daily]

Shenzhen Stock Exchange likely to be key driver of rebound in 2nd half of 2012

BEIJING - China will continue to lead the global IPO market next year, despite the dramatic weakening in new offerings in the second half of 2011, accounting firm Ernst & Young LLP (E&Y) said on Wednesday.

The Shenzhen Stock Exchange was the world's most active IPO market in 2011, ranking first in the number of issues and second in the amount of capital raised in the first 11 months of this year, according to E&Y.

"There will be a rebound of IPOs in the first half of next year and the Shenzhen Stock Exchange will be a key driver," said Edward Ho, managing partner of assurance services at E&Y.

"The IPO pipeline of Chinese issuers remains healthy and we expect the total amount of capital raised in the first half of next year to be at least 300 billion yuan", or about $47.6 billion, he said.

The Shenzhen exchange, including the small and medium-sized enterprise board and the startup board ChiNext, raised 181 billion yuan in 243 deals in 2011, according to E&Y.

China's main board, the Shanghai Stock Exchange, ranked fourth globally in terms of capital raised after the stock exchange of Hong Kong.

Global IPO activity has declined significantly since mid-2011 due to market concerns about the eurozone debt crisis and the downgrade of the US sovereign debt rating.

Volatile equities markets have also undermined investor and issuer confidence, E&Y said.

Capital raised through IPOs for the first 11 months totaled $155.8 billion globally, down 39 percent year-on-year, it said. China's A-share market saw a 42 percent year-on-year decline in IPO capital raised.

"In addition to global economic uncertainties, tighter domestic regulations - such as new rules that require listed companies to pay higher dividends and the tougher delisting requirements - may also be contributing to the decline in IPO activity," said Sophie Chen, assurance partner at E&Y.

Ho said that he remains optimistic about next year's IPO situation, with increasing liquidity in the markets as China gradually loosens monetary policy to support growth.

"We think that the worst has passed," he said. "There still is a healthy pipeline of private companies waiting to go public as soon as market conditions improve."

He added that a speedy resolution of Europe's debt crisis would help stabilize global markets and restore investor confidence, which would lead to a recovery of the IPO market.