China's capital market activity falls to multi-decade low

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Activity in China's equity capital markets on the mainland and elsewhere has fallen to multi-decade lows, highlighting how the loss of momentum in the world's second-largest economy is weighing on investor confidence. It highlights the presence of animals.

Chinese companies have raised just $6.4 billion in mainland IPOs, follow-on stock and convertible stock offerings so far this year, the lowest level on record, according to Dealogic data.

The company raised $1.6 billion in offshore markets, including Hong Kong, the lowest amount since 2003. China's outbound M&A of $2.5 billion was the lowest recorded for the same period since 2005.

In the international bond market, Chinese companies, banks and government borrowers have issued $26 billion so far this year, slightly more than last year's $24 billion, but otherwise the lowest level since 2016. The mainland borrowed $246 billion, an increase of 17% from last year. Year.

“This is definitely the worst of my career in terms of global investor interest in China,” said Wang Chi, chief investment officer at Hong Kong's UOB Kay Hian, who started working in the financial industry in the 1990s. Told.

“It doesn't matter what type of investor it is, but it's still uncertain,” said one Chinese financial market official, who spoke on condition of anonymity. “Economic uncertainty has not yet been dispelled.”

China's economy grew 5.2% last year, but the strong recovery expected after three years of strict coronavirus pandemic measures were lifted in early 2023 did not materialize. Consumer prices rose 0.1% last month, but remain sluggish. The economy has been in deflationary territory for most of the past year.

Capital market data reflects the growing isolation of China's financial system even as the pandemic has ended. At this stage in 2021, Chinese companies have issued $61 billion of stock abroad, 39 times more than they have issued so far in 2024. Companies have issued $39 billion in bonds, nearly four times the current rate.

International banks have long sought to tap into China's vast financial system, but have had to contend with reduced levels of activity. Last month, Swiss agrochemicals group Syngenta withdrew its long-standing plan to list in Shanghai, while other plans were also scrapped due to increased scrutiny of listings by the country's securities regulator. Domestic new stock issuance has fallen 83% since the beginning of the year.

International companies also need to navigate rising geopolitical tensions between Beijing and Washington, where there is a special committee scrutinizing U.S. business in mainland China.

Tensions weighed on outbound M&A activity last year, but by this stage in 2023 deal volumes have increased by more than three times current rates.

Rising borrowing costs in international bond markets have made it relatively more expensive for Chinese issuers to borrow abroad, bankers said. In contrast to central banks in North America and Europe, China has lowered its key borrowing rates in recent years.

“China and China-related companies are focusing more on their core businesses and making more disciplined capital spending,” said Mandy Chu, head of China for global banking at UBS.

Property developers, once a mainstay of Asia's high-yield bond markets, have effectively stopped borrowing from abroad in the past two years after a government crackdown on leverage derailed their business models.

China's CSI300 index, made up of stocks listed in Shanghai and Shenzhen, is up 3% since the beginning of the year, but is down about 40% from its 2021 peak.