Shenzhen has edged out financial hub Shanghai to lead the country’s major cities in adding newly listed companies so far this year, as an increasing number of tech firms in the southern China city turn to the domestic capital market to fund their expansion.

Figures from market information provider Tonghuashun show that a total of 19 companies from Shenzhen had launched initial public offerings (IPOs) as of Sept. 26, closely followed by Shanghai with 18 and Suzhou with 17. Beijing came in fourth by adding 15 new listings.

The number of Shenzhen companies floating shares on domestic stock exchanges has swelled to 422, trailing Beijing and Shanghai, Shenzhen Economic Daily reported yesterday, without saying how many A-share companies the two cities currently have.

Official figures issued earlier this year by Shenzhen’s financial industry development and service office showed that 42 Shenzhen companies got listed in 2022 and the number of the city’s companies listed on domestic and overseas stock exchanges jumped to 535 at the end of last year, with 405 firms listed on the Shenzhen, Shanghai or Beijing stock exchange.

The 19 Shenzhen companies raised a total of 25.50 billion yuan (US$3.49 billion) from their IPOs, compared with the 26.16 billion yuan by Beijing and 23.48 billion yuan by Shanghai, according to Tonghuashun data.

Meanwhile, the domestic IPO market was quite vibrant in the first three quarters of the year, with the Shanghai Stock Exchange leading global bourses in IPO proceeds and the Shenzhen exchange beating out its counterparts in terms of the number of new listings.

But Tonghuashun data show that the protracted weakness in the domestic stock market has already dented IPO activities, with the number of IPOs from January to September tumbling 12% year on year and the amount of money raised from new share sales slumping 33% compared with the same period a year ago.

More than 80% of Shenzhen’s newly listed companies are from emerging industries, such as information technology, artificial intelligence and semiconductors.

Shenzhen has a large pool of listing hopefuls. Tonghuashun data show that 11 Shenzhen companies have already passed the listing reviews so far this year but still awaited the nod from regulators for their shares’ trading debut. 

A total of 48 companies in the city have begun the so-called pre-listing tutoring process with investment banks ahead of a planned IPO so far this year.

Pre-listing tutoring is a compulsory procedure in China that every IPO applicant must go through before filing their listing plan to regulators, which can take between three and 12 months. During the tutoring period, investment bankers coach company executives on IPO-related issues.

Shenzhen has set an ambitious goal to list the city’s firms. According to an action plan unveiled Nov. 16 last year by Shenzhen’s industry and information technology bureau, the number of Shenzhen-based companies listed on domestic and foreign stock exchanges is expected to exceed 600 by 2025, with funds raised from their IPOs and refinancing topping 300 billion yuan and a total of more than 3,000 companies in the pipeline for listing.

The distribution of Shenzhen’s 422 A-share listed companies across various districts is largely uneven, with Nanshan housing the largest number with 145. Futian comes in a distant second with 60, followed closely by Bao’an with 58. In addition, Longhua, Longgang, Guangming, Luohu, Pingshan, Yantian and Dapeng each have 38, 34, 32, 28, 21, four and two, respectively.