(Bloomberg) -- Chinese firms are beating their US and European peers early in the year on equity financing, aided by optimism about the nation's reopening while the developed world grapples with rising interest rates and recession fears.
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The companies and their shareholders have raised $8.1 billion via follow-on share sales and initial public offerings from Shanghai to New York since 2023 began, versus $4 billion by US companies and $1.1 billion by those in Europe, Bloomberg-compiled data show.
The performance puts Chinese companies on course to be the first to emerge from last year's global slump in share sales, following a sharp rally spurred by Beijing's pivot to prioritizing growth from Covid curbs. The road to recovery is expected to be bumpier in the US and Europe, where aggressive monetary tightening and looming economic weakness continues to depress risk appetite.
"The increased level of capital raising by listed Chinese companies in the first few weeks of 2023 is a precursor of much more to follow," said James Bean, an ECM portfolio manager at Myriad Asset Management. "Chinese corporate balance sheets need strengthening and cash reserves need replenishing as the Chinese economy regenerates its growth trajectory."
The dominance of Chinese firms in the primary market has come as stocks from Hong Kong to Shenzhen joined the world's best performers: a key gauge of mainland companies listed in Hong Kong has risen almost 16% this year, compared with a 5.8% gain in the S&P 500.
It's also happening against the backdrop of a record year of IPOs in China's onshore market. The new listings boom in 2022 propelled the nation's share in the global tally for IPO proceeds to 46%, nearly four times the US, from just 13% at the end of the previous year.
Behind the rally was a slew of policy adjustments by Chinese leaders in recent months, from ending the Covid Zero strategy to easing a harsh tech crackdown and a sweeping property rescue campaign. Authorities also have made efforts to improve ties with countries including the US and Australia.
Beijing's supportive monetary policy, a divergence from the hawkish stance adopted by the Federal Reserve and other major global central banks, has continued to provide a cushion for Chinese assets.
First to Rebound
Additional share sales were the first to bounce back for Chinese companies this year, given they are quicker to execute and reflect a trend to get them done before the Lunar New Year holidays in late January. They have spread from China's onshore market to venues like Hong Kong and New York.
Chinese firms have raised nearly $2 billion through such offerings in Hong Kong so far in 2023, up 41% on year. The deals include a $509 million sale by the major shareholder in pharmaceutical firm Wuxi Biologics Cayman Inc. and a $206 million top-up placement by China Education Group Holdings Ltd.
Five such offerings also took place in the US to raise nearly $1.4 billion, including a $510 million sale by video entertainment company iQIYI Inc.
Given the healthy appetite, secondary listings and IPOs by Chinese firms also are expected to do better in markets including Europe, where a strong run will likely continue after regulators expanded a program for cross-border listings.
Europe and US Sales
Shenzhen-listed hog breeder Muyuan Foods Co. is said to be looking to raise about $1.5 billion through an issuance of global depositary receipts in Zurich. The pipeline for the continent also includes a jumbo sale by solar power equipment company Longi Green Energy Technology Co. in Switzerland that could be as large as $4 billion as Bloomberg reported in November.
There are also indications of a revival of Chinese IPOs in the US, a route that's been mostly shut due to regulatory clampdowns or restrictions from Beijing and Washington since mid-2021.
"The overall performance of Chinese equity is conducive for equity raising," said Ke Yan, head of research at DZT Research in Singapore. "When investors are evaluating deals, important factors to consider are whether the company is relevant in the post-tightening era, and the ability to monetize its business model."
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