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Thursday, December 2, 2021

China’s technology financing declines for the first time in seven years

As Beijing’s crackdown on lucrative industries prompts investors to look for alternative markets, funds raised by tech start-ups listing in mainland China are expected to see their first annual decline in seven years.

Dealogic’s data shows that in 2021, technology companies’ initial public offerings on the China Stock Exchange have raised approximately US$14 billion, which is US$2.3 billion lower than last year’s total, as bankers in Shanghai and Shenzhen are entering the usual trading calm. Expect.

At the same time, this year’s technology listing in India raised US$2.6 billion, an increase of 550% compared to last year, and even set a record high before Paytm’s IPO. It is expected to bring in a record US$2.5 billion this week. After pricing on Friday at the high end of its range.

The huge gap in total funding between countries reflects China’s lead in fostering an ecosystem of local tech giants.

But analysts said that record Indian stock sales indicate that the market is maturing, and regulatory changes allow loss-making companies to list in Mumbai, encouraging more start-ups to pay attention to the open market.

The first test of these rules was in July, with the listing of food delivery company Zomato, the country’s first major technology IPO. The stock price of this money-burning startup almost doubled its issue price, when the company was valued at approximately $12 billion.

Histogram of funds raised in Indian tech IPOs (in billions of dollars) shows the boom in Indian tech stocks

China’s regulatory whirlwind has depressed the stock prices of its largest technology brands and disturbed investors, including those who are concerned about government-backed rapid listings of state-backed groups.

“International investors are beginning to understand that many Chinese Internet companies will have difficulty maintaining past profits,” said Wong Kok Hoi, founder of APS Asset Management.

“If the major investors authorized to invest in the emerging Asian Internet industry, such as private equity funds, believe that China’s game is over, they will move elsewhere, and India is the main choice.”

Bhavish Aggarwal, CEO of SoftBank-backed ride-sharing group Ola, told the Financial Times last month that Indian entrepreneurs should use China’s regulatory turmoil to attract global funds.

Analysts and strategists said that China’s stock sales this year have been affected by many factors, including stricter listing requirements and the underperformance of domestic stocks. China’s benchmark CSI 300 Index has fallen by about 6% this year.

But the biggest blow came from Beijing’s suppression of technology companies, which made many investors reluctant to go public.

This year’s high-profile technology listed companies failed to fulfill their wishes. For example, the artificial intelligence startup Megvii Technology applied for an IPO on the Shanghai Science and Technology Innovation Board in March.

Thomas Gatley, an analyst at Longzhou Economics in Beijing, said: “The regulatory storm has sucked too much oxygen from the room.”

He added that China’s largest technology groups suitable for the onshore market, including battery manufacturer Ningde Times and chip manufacturer SMIC, have been listed, and there are almost no major transactions in progress.

Additional reporting by Benjamin Parkin in New Delhi

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