China's technology, media and telecommunication IPOs reached a new high in the first half of 2015, but the momentum is expected to slow in the next six months due to capital market fluctuations, according to a report from PricewaterhouseCoopers on Tuesday.
There were 42 Chinese technology, media and telecommunication IPOs in the first half, an increase of 75 percent year-on-year, and their financing totaled 22.1 billion yuan ($3.5 billion), it said.
"As we can see, a more streamlined and transparent listing procedure for IPOs has made the domestic exchanges more attractive. However, the positive momentum is expected to slow down in the second half of 2015 given the temporary freeze to IPOs by the regulatory body to cope with the recent significant capital market fluctuations," said Amanda Zhang, northern China technology industry leader with PwC China.
The State Council ordered the suspension of new share offerings on July 4 after a three-week stock market collapse.
Vincent Cheuk, market leader of Beijing entrepreneur group and northern China head of the private equity group at PwC China, said: "The IPO slowdown creates opportunities for private equity companies, hedge funds and sovereign wealth funds because the financing demand of enterprises has always been strong."
Regarding Chinese technology, media and telecommunication IPOs in the first half, the report said 30 were made on Shenzhen's ChiNext board and small and medium-sized enterprise board, nine were made on Shanghai's main board, and only three were undertaken overseas.
The report said the average price-earnings ratio of Chinese A-share technology, media and telecommunication companies had been as high as 74 by the end of August 31, while that by the end of June 30 it had been 115.
"In the long run, we still anticipate significant growth in technology, media and telecommunication listings on domestic exchanges as a result of the introduction of the new registration-based system, as well as the continuation of multi-level capital market reform," said Zhang.
She added that some Chinese technology, media and telecommunication companies will still choose overseas markets for listing because of their corporate structure and capabilities, as well as more mature investors in those markets.
Strategic emerging industries, such as technology, media and telecommunication, have been highlighted as important forces guiding socioeconomic development since the State Council issued a statement on accelerating the cultivation and development of strategic emerging industries on Oct 10, 2010.
Today, the emergence and development of a group of high-growth, tech-innovation companies is ushering in strong demand for capital market financing, a trend with relevance to the reforms in the domestic stock market.
"Support from the financial system and capital markets is crucial for the development of startups. The future reform of the capital market is significant because it will provide a richer financing channel for innovative companies and in addition, the market's value discovery function will also ensure there is a strong impetus for innovation-driven industries," Cheuk said.
