#1KPMG Mainland China and Hong Kong 2020 review: IPOS and other market trends 0 10 10 0 10 10 5258 479 0 10 010#2Foreword Despite overall market sentiment and investor confidence this year being driven by COVID-19 as well as political, social and economic concerns, global IPO markets have shown resilience, recovering after a slower first half and expected to end strong by recording an increase of more than 23 percent in terms of proceeds by the end of 2020, compared with last year. This increase is mainly due to a surge in fundraising in the leading stock markets in Mainland China, Hong Kong and the US, especially the Mainland China and Hong Kong stock exchanges, which are -set to record their most active year since 2011 in terms of proceeds. The Shanghai Stock Exchange is expected to rank among the global top three exchanges in terms of total funds raised, boosted by the continuing popularity of the STAR Market. The A-share market is up 82 percent in terms of funds raised compared with last year. On the back of the STAR Market's success, China has deepened its capital markets reform with the expansion of registration-based IPOs in the ChiNext market during the year. The STAR and ChiNext board focus on supporting innovative growth companies and start-ups, further facilitating the growth of multi-layered capital markets, and enhancing liquidity and investments in the A-share market. 85 Hong Kong's market has continued to attract up-and-coming companies from around the world, with a number of homecoming listings. During the period, nine US-listed Chinese-based companies completed secondary listings in Hong Kong, raising a total of HKD131.3 billion, representing approximately 34 percent of funds raised. The trend of secondary listings has highlighted Hong Kong's solid fundamentals and its importance as an international capital-raising venue with a growing ecosystem for innovation and new economy companies. GE Despite prevailing uncertainties marked by the COVID-19 outbreak as well as political, social and economic concerns, the global IPO markets remained resilient and ended strong in 2020. As businesses gradually adapt to the new normal and with the rollout of COVID-19 vaccines, there is a good chance for the global economy as well as the capital markets to rebound in the coming year. Paul Lau Partner Head of Capital Markets/ Professional Practice KPMG China Note: All analysis is based on data as at 6 December 2020, adjusted to numbers of confirmed listings up to 31 December 2020, unless otherwise stated. KPMG © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved. 1#3Top-performing global stock exchanges Based on the latest estimate, Hong Kong and Shanghai are among the top three in 2020 for IPO fundraising and number of listings. As the top three exchanges are very close in terms of total proceeds, the actual ranking for 2020 full year may change. 2020 full year* 2019 full year Rank Stock exchange IPO proceeds (USD billion)1 IPO proceeds Rank Stock exchange (USD billion) 1 NASDAQ HKEX 53.5 1 HKEX 40.4 50.3 2 Saudi Stock Exchange 30.7 Shanghai Stock Exchange 49.9 NYSE Shenzhen Stock Exchange NASDAQ 27.9 32.2 4 Shanghai Stock Exchange 27.2 18.5 5 NYSE (1) Note: All analysis is based on data as at 6 December 2020, adjusted to numbers of confirmed listings up to 31 December 2020, unless otherwise stated. The exchange rate for USD/HKD is 7.75. Sources: Bloomberg and KPMG analysis 25.7 KPMG © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved. 2#4Top 10 largest global IPOS 2020 YTD Proceeds Company Exchange Sector (USD billion) 1 Semiconductor Manufacturing International Corp. SSE-STAR 7.5 TMT 2 JD.com, Inc. W HKEX 4.5 TMT 3 Beijing-Shanghai High Speed Railway Co., Ltd. SSE 4.4 Transport, Logistics and Others Funds raised by top 10 IPOS 2020 YTD: USD 38.9 billion 4 JD Health # HKEX 4.0 Healthcare/ Life Sciences (15% of global funds raised) 5 Snowflake Inc. NYSE 3.9 TMT 6 DoorDash Inc # NYSE 3.1 TMT 7 NetEase Inc. HKEX 3.1 TMT 8 AirBnb Inc # NASDAQ 2.8 TMT 9 JDE Peet's BV Amsterdam 2.8 Consumer Markets 2019 full year: USD 74.2 billion (35% of global funds raised) 10 Allegro.eu SA Warsaw 2.8 Consumer Markets Sources: Bloomberg and KPMG analysis, excludes blank check and trust companies # Expected to list by the end of 2020. Funds raised estimated is based on mid price or offer amount published on official sites KPMG 2019 Proceeds Company Exchange Sector Full year (USD billion) 1 Saudi Aramco Saudi 29.7 ENR 2 Alibaba Group Holding Limited HKEX 13.0 TMT Sizable technology 3 Uber Technologies Inc. NYSE 8.2 TMT 4 Budweiser Brewing Co APAC Ltd. HKEX 5.8 Consumer Markets companies 5 Postal Savings Bank of China SSE 4.8 Financial Services continue to be a key driver of the IPO markets 6 Avantor Inc. NYSE 3.4 Healthcare/Life Sciences 7 Nexi SpA Brsaltaliana 2.4 Financial Services 8 Lyft Inc. NASDAQ 2.4 TMT 9 XP Inc. NASDAQ 2.3 Financial Services 10 TeamViewer AG Xetra 2.2 TMT Sources: Bloomberg and KPMG analysis, excludes blank check and trust companies © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved. 3#5Mainland China IPO market Hong Kong IPO market Stock Connect KPMG ☑ © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved. 4#6Mainland China IPO market KPMG © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved.#7A-share IPOs: 2020 highlights 2128.8323 The Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE) are expected to record 383 new listings for a combined RMB 461.0 billion in 2020, representing an 82 percent increase in terms of funds raised compared with 2019. This is in fact the most active year in terms of funds raised since 2011. The strong performance was backed by the continuing popularity of the STAR Market, driving the SSE to rank among the global Top 3 exchanges in terms of total funds raised. 284.9287 In its first full year of operation, the STAR Market recorded 141 listings, raising RMB 217.2 billion, contributing 47 percent of funds raised in the A-share market during the year. Since the debut of STAR market listings in July 2019 until now, 211 companies have listed on the board, raising a total of RMB 299.7 billion, representing approximately 47 percent of funds raised during this 18-month period. Backed by a solid pipeline of over 200 listings, the STAR Market is expected to remain the major contributor to the A-share IPO market for the coming year. the 1689 The registration-based IPO system further expanded in 2020 as the first batch of companies being debuted in the Shenzhen ChiNext board in August this year. By the end of 2020, a total of 58 companies are expected to be listed under ChiNext's new registration-based IPO system, raising a total of RMB 64.2 billion, representing 14 percent of the funds raised in the A-share market in 2020 with only five months of showing. This reform is an expansion of the approach taken in the STAR Market, with a focus on serving innovative growth companies and start-ups. All analysis is based on a combination of data as at 6 December 2020 and KPMG estimates, unless otherwise stated. Excludes listings by introduction. 79 KPMG © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved. 90 6#8A-share IPOs: overview ■ The A-share IPO market is expected to complete 383 listings for a combined RMB 461.0 billion by the end of 2020. This marks a 82 percent increase in terms of funds raised and a 91 percent uptick in terms of the number of listings compared with the same period last year, boosted by growth in the STAR Market and the ChiNext board. The first batch of registration-based IPOs were listed in the ChiNext board during the third quarter, highlighting the country's efforts to reform the capital markets. By the end of 2020, 58 companies are expected to be listed under ChiNext's new registration-based IPO system*, raising a total of RMB 64.2 billion. This total represents approximately 14 percent of total funds raised during the year. SSE SSE - STAR SZSE* SZSE - ChiNext* Total Total funds raised (RMB Total Average Total funds No. of IPOS deal size raised (RMB (RMB No. of IPOS Average deal size Average Average billion) billion) (RMB billion) Total funds raised (RMB billion) funds Total funds Total No. of IPOS deal size raised (RMB No. of IPOS deal size no. raised (RMB of (RMB (RMB billion) billion) IPOS billion) billion) billion) 2020 118.8 85 1.40 217.2 141 1.54 60.8 99 0.61 64.2 58 1.11 461.0 383 2019 106.2 53 2.00 82.4 70 1.18 64.6 78 0.83 253.2 201 2018 86.5 57 1.52 2017 137.7 214 0.64 2016 101.7 103 0.99 I 51.3 48 1.07 92.5 222 0.42 47.9 124 0.39 . 1 1 137.8 105 230.2 436 149.6 227 Sources: Wind and KPMG analysis Note: All figures are based on a combination of data as at 6 December 2020 and KPMG estimates, unless otherwise stated. * The numbers presented under "SZSE - ChiNext" above represent IPOs completed under the registration-based system following the reform. During the year, there are 44 companies listed on the ChiNext board prior to the reform, raising a total of RMB 23.3 billion. For analysis purpose, these IPOs were included under "SZSE" above. KPMG © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved. 7#9A-share IPOs: sector analysis 2020: Top 5 sectors - by number of IPOs Total number of IPOS = 383 ■A-share (traditional market) ■New ChiNext Board ■STAR Market 45% 40% 35% 13% 30% 25% 6% 14% 20% 15% 4% 1% 10% 21% 8% 3% 1% 1% 5% 10% 1% 6% 1% 3% 3% 0% Industrials TMT Healthcare / Consumer ENR 4% Others Life Sciences Markets Source: Wind and KPMG analysis Industrials Industrials continued to lead the market in terms of the number of new listings, backed by a strong pipeline of 321 companies currently seeking a listing, of which half are attributed to the ChiNext board. We expect the sector to remain a major contributor to the total number of new listings in the coming year. 'Industrial internet' remains a focal point as China continues to strive for high-quality economic development over the long run. This can be achieved through the integration of physical equipment with big data, artificial intelligence and the Internet of Things (IoT). Among the 58 companies listed on the ChiNext board under the registration-based system, 22 companies are from the industrials sector, which raised a total of RMB 13.8 billion. 2019: Top 5 sectors - by number of IPOS Total number of IPOS = 201 A-share (traditional market) STAR Market 40% 35% 30% 10% 14% 25% 20% 15% 25% 10% 19% 1% 8% 5% 6% 6% 6% 0% Industrials TMT 2% Healthcare/Life Consumer Sciences Markets Financial Services Others Note: All analysis is based on a combination of data as at 6 December 2020 and KPMG estimates, unless otherwise stated. Excludes listings by introduction. KPMG 3% Source: Wind and KPMG analysis Technology, Media & Telecoms The TMT sector continued its lead in terms of funds raised and placed second in the number of new listings. Three out of the top 10 companies are from the TMT sector and all of them were listed on the advanced-technology and innovation-focused STAR Market. Buoyed by ongoing government support for science and technology firms, we expect the sector to continue being a driving force of the A-share market, with a significant number of technology companies seeking to list through the STAR Market and the new ChiNext board. The need for digital transformation is even greater under COVID-19, where connectivity plays a vital role in the evolution of digital. Incredible opportunities are ahead for 5G and software development companies, playing a key role in the global economic recovery. © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved. 8#10A-share IPOs: sector analysis (cont'd) 2020 YTD: Top 5 sectors - by total funds raised Total funds raised = RMB 461.0B ■A-share (traditional market) ■New ChiNext Board ■STAR Market 1% 1% 40% 35% 30% 25% 26% 20% 9% 15% 3% 2% 10% 10% 3% 13% 5% 5% 1% 9% 7% 5% 2% 3% 0% TMT Industrials Healthcare / Consumer Life Sciences Markets Transport, Logistics and Others Others Source: Wind and KPMG analysis + Healthcare/Life Sciences The sector ranked third in both the number of new listings and total funds raised, backed by a strong showing of healthcare/life sciences IPOs in the STAR Market. It accounts for approximately 13 percent of the proceeds in the market for the year. Seven pre-profit biotech companies were listed in the STAR Market during the year demonstrating the bourse's flexibility and presence for biotech firms. Amid the ongoing development of the pandemic, fueled by an ever-growing demand for healthcare for the world's largest population, healthcare/life sciences is expected to be one of the driving forces of the A-share IPO market. 35% 2019: Top 5 sectors - by total funds raised Total fundraising = RMB 253.2B A-share (traditional market) STAR Market 30% 25% 20% 18% 7% 15% 27% 10% 1% 15% 5% 10% 7% 6% 8% 1% 960 TMT Financial Services Industrials Energy and Natural Resources Healthcare/ Life Sciences Others % EES Source: Wind and KPMG analysis Note: All analysis is based on a combination of data as at 6 December 2020 and KPMG estimates, unless otherwise stated. Excludes listings by introduction. KPMG Consumer Markets The sector ranked fourth in terms of both funds raised and the number of IPOs. Yihai Kerry Arawana Holdings Co., Ltd, a food wholesaler and distributor was listed in the ChiNext board, raising a total of RMB 13.9 billion, is the third largest IPO in the A-share market during the year. The sector has maintained a strong pipeline, as of 6 December 2020, there were 81 active applicants from the sector, which account for approximately 10 percent of the overall A-share pipeline. © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved. 6#11Top 10 largest A-share IPOS 2020 Company Exchange Proceeds (RMB billion) Sector 1 Semiconductor Manufacturing International Corp. SSE-STAR 53.2 TMT 2 Beijing-Shanghai High Speed Railway Co., Ltd. SSE 30.7 3 Yihai Kerry Arawana Holdings Co.,Ltd SZSE-ChiNext 13.9 Transport, Logistics and Others Consumer Markets 4 China International Capital Corporation Limited SSE 13.2 Financial Services 5 Qi An Xin Technology Group Inc. SSE-STAR 5.7 TMT 6 Cathay Biotech Inc. SSE-STAR 5.6 Healthcare/ Life Sciences 7 CanSino Biologics Inc. SSE-STAR 5.2 Healthcare / Life Sciences 8 Bestechnic (Shanghai) co. Itd# SSE-STAR 4.9 TMT 9 Shanghai Junshi Biosciences Co., Ltd. SSE-STAR 4.8 10 Beijing Roborock Technology Co., Ltd. SSE-STAR 4.5 Consumer Markets # Expected to list by the end of 2020. Funds raised estimated is based on mid price. Source: Wind and KPMG analysis Healthcare/Life Sciences Sector Funds raised by top 10 IPOS 2020: RMB 141.7 billion ~ 31% of total proceeds 2019: RMB 100.6 billion 40% of total proceeds 2019 Company Exchange Proceeds (RMB billion) 1 Postal Savings Bank of China Co., Ltd. SSE 32.7 Financial Services 2 China Zheshang Bank Co.,Ltd. SSE 12.6 Financial Services - 3 CGN Power Co., Ltd. SZSE 12.6 ENR 4 China Railway Signal & Communication Corporation Limited SSE - STAR 10.5 TMT 5 Chongqing Rural Commercial Bank Co.,Ltd. SSE 10.0 Financial Services 6 Ningxia Baofeng Energy Group Co., Ltd. SSE 8.2 Industrials 7 Beijing Kingsoft Office Software, Inc. SSE - STAR 4.6 TMT 8 Cnooc Energy Technology & Services Limited SSE 3.8 ENR 9 Shenzhen Transsion Holdings Co., Ltd. SSE - STAR 2.8 TMT 10 Montage Technology Co.,Ltd. SSE - STAR 2.8 TMT Note: All analysis is based on a combination of data as at 6 December 2020 and KPMG estimates, unless otherwise stated. Excludes listings by introduction. Source: Wind and KPMG analysis KPMG © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved. 10 10#12A-share IPO pipeline As of 6 December 2020, there were over 800 active IPO applicants, among which over 49 percent are seeking to list in the ChiNext board and 28 percent in the STAR Market. These numbers indicate solid market interest in advanced-technology and innovation IPOs. We expect TMT and Industrials to continue to be key drivers for the A-share market, as approximately 65 percent of the existing pipeline belongs to these sectors. Before the ChiNext board reform in June this year, there were around 202 companies seeking a listing on the board. Out of these companies, over 176 applicants have subsequently converted to the registration- based new ChiNext board and have resubmitted their applications since June 2020. A-share IPO applications A-share IPO applications - 2020 sector breakdown 795 806 By number of companies 3%2% Total number of companies: 806 3% 5% 10% 800 617 620 361 600 551 394 540 514 122 141 111 107 101 400 296 28 476 440 200 433 413 268 247 208 187 0 251 226 225 201901 2019Q2 2019Q3 2019Q4 2020Q1 2020Q2 2020Q3 2020Q4 ■Active applicants - ChiNext ■Active applicants - STAR Market ■Active applicants - traditional market 12% 25% ■Industrials ■TMT ■Healthcare and Life Sciences Energy and Natural Resources ■Financial Services 40% ■Consumer Markets Infrastructure/ Real estate Transport, Logistics and Others Note: All figures are based on a combination of data as at 6 December 2020 and KPMG estimates, unless otherwise stated. STAR market active applicants included suspended applications (E) which is due to the expiry of their financial information. Historically these applications have been reactivated promptly with updated financial information being submitted by the listing applicant. Source: Wind and KPMG analysis KPMG © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved. 11#13STAR Market pipeline process As of 6 December 2020, there were 225 active applicants in the pipeline. 01 02 Application accepted Review in progress 03 Pending a hearing 04 Approved by SSE Listing Committee 05 Reported to the CSRC 06 Registered with the CSRC 07 Prepare for Listing 17 115 10 55 25 3 Note: All figures are based on a combination of data as at 6 December 2020 and KPMG estimates, unless otherwise stated. STAR market active applicants included suspended applications (+) which is due to the expiry of their financial information. Historically these applications have been reactivated promptly with updated financial information being submitted by the listing applicant. Sources: Wind, SSE and KPMG analysis KPMG © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved. 12#14STAR Market pipeline in detail Seven pre-profit biotech companies were listed in the STAR Market during the year demonstrating the bourse's flexibility and presence for biotech firms. STAR Market applications - sector breakdown* By number of companies Total number of companies = 225 ENR Others 3% 1% STAR Market applicants by listing criteria Listing criteria* No. of Active Applicants No. of Listed Companies Market Cap & Profit 192 178 Market Cap, Revenue & R&D 7 6 CO Market Cap, Revenue & III 2 1 Operating Cash Flow IV Market Cap & Revenue 10 15 Market Cap & Advanced V 7 7 Technology WVR structured WVR 2 1 companies Red Red-chips companies chips Sources: SSE and KPMG analysis Healthcare / Life sciences 23% TMT 23% Advanced industrials 38% Source: Wind and KPMG analysis Note: All figures are based on a combination of data as at 6 December 2020 and KPMG estimates, unless otherwise stated. STAR market active applicants included suspended applications () which is due to the expiry of their financial information. Historically these applications have been reactivated promptly with updated financial information being submitted by the listing applicant. Criteria I, which has the lowest market capitalisation requirement, is the most predominant listing criterion adopted. Note: Data as at 6 December 2020. For details about listing criteria, please refer to Sci- Tech Innovation Board rules by SSE and CSRC (available only in Chinese). KPMG © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved. 13#15ChiNext pipeline As of 6 December 2020, there were 394 active applicants in the pipeline. 01 02 Application accepted Review in progress 03 Pending a hearing 04 Approved by SZSE Listing Committee 05 Reported to the CSRC 06 Registered with the CSRC 07 Prepare for listing 37 259 68 25 5 ☑ Note: All figures are based on a combination of data as at 6 December 2020 and KPMG estimates, unless otherwise stated. ChiNext active applicants included suspended applications () which is due to the expiry of their financial information. These applications would be reactivated promptly with updated financial information being submitted by the listing applicant. Sources: Wind, SZSE and KPMG analysis KPMG © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved. 14#16ChiNext pipeline in detail Currently, all of the 58 listed companies under the registration-based system were listed using Criteria I - the net profit requirement. ChiNext board applicants by listing criteria By number of companies ChiNext applications - sector breakdown* Transport, Logistics and Others 2% TMT 26% Total number of companies = 394 ENR 3% Healthcare / Life sciences 11% Listing criteria No. of Active Applicants No. of Listed Companies* | Net Profit 386 58 Net Profit, Revenue & 8 Market Cap Revenue & Market Cap WVR WVR structured companies Red chips Red-chips companies Sources: SSE and KPMG analysis Note: Data as at 6 December 2020. *Listed under registration-based system. For details about listing criteria, please refer to ChiNext board rules by SZSE and CSRC (available only in Chinese). KPMG Consumer Markets 9% Industrials 47% Infrastructure / Real Estate 2% Source: Wind and KPMG analysis Note: All figures are based on a combination of data as at 6 December 2020 and KPMG estimates, unless otherwise stated. ChiNext active applicants included suspended applications (+) which is due to the expiry of their financial information. These applications would be reactivated promptly with updated financial information being submitted by the listing applicant. The reform of the ChiNext and the pilot registration-based IPO system are major initiatives to further optimise the system of the capital market after the launch of the STAR Market. © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved. 15#17A-share IPOs: 2021 outlook China has demonstrated its resilience as it continues its recovery from the COVID-19 pandemic. On the back of stabilising economic conditions and positive factors such as the Chinese regulators' accelerated capital market reforms this year, the A-share market has made a strong showing in the current year. The pipeline remains strong, recording over 800 active applicants as at 6 December, boosted by the number of applicants in the registration-based STAR Market and the ChiNext board, indicating solid confidence and recognition from the market. In regard to sectors, TMT and advanced industrials comprised over 60 percent of the pipeline and are expected to remain the key driving force in the A-share IPO market. The pilot registration-based IPO system launched by the ChiNext board in June this year is designed to ease the burden on enterprises and increase transparency with an open and paperless application review process. Wide market interest has been evident as the number of active applicants in the market already reached 390 - all submitted since June this year. The reform is enhancing the diversity and competitiveness of China's capital markets and further helps innovative growth companies or start-ups to expand their business and raise funds. KPMG The A-share market had a deepened capital market reform with the expansion of registration-based IPOs this year amid China's focus to foster a multi-level capital markets system. This would further increase market inclusiveness and coverage, assisting companies of different sectors meeting their funding demands, and further bolstering the real economy as a whole. " Louis Lau Partner Capital Markets KPMG China 山民生银 16 10 © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved.#18Hong Kong IPO market KPMG © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limi ("KPMG International"), a private English company limited by guarantee. All rights reserved. ted 17#19Hong Kong IPOs: 2020 highlights While the global IPO momentum has been affected due to the ongoing COVID-19 outbreak, the Hong Kong IPO market has shown strong resilience and vitality, ranking second globally in terms of total proceeds in 2020 YTD. During the period, 140 IPOs are expected to be completed, raising a total of HKD 389.9 billion. This represents a 24 percent increase in terms of funds raised compared with the same period last year and is in fact the most active year since 2011. The increase in fundraising is mainly attributable to homecoming listings, which benefits the city's financial industry and the capital market. During the period, nine US-listed, Chinese-based companies have completed secondary listings, raising a total of HKD 131.3 billion, representing approximately 34 percent of funds raised. These secondary listings signify Hong Kong's solid fundamentals and its importance as an international capital-raising venue with a growing ecosystem for innovation and new- economy companies. The ecosystem has further cultivated the development and fundraising for healthcare and life sciences companies, and Hong Kong has already become the largest in Asia and the second-largest biotech IPO market in the world. During the year, 22 healthcare/life sciences companies have been listed, raising a total of HKD 98.8 billion, contributing 25 percent of total funds raised. Out of these companies, 14 pre- revenue biotech companies were listed under Chapter 18A, raising an aggregate of HKD 41.1 billion. Note: (1) All analysis is based on a combination of data as at 6 December 2020 and KPMG estimates, unless otherwise stated. Excludes listings by introduction. KPMG © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved. 18#20Hong Kong IPOs: overview ■ The Main Board recorded 132 new listings during the year for a combined HKD389.3 billion. While the number of completed Main Board IPOs this year is comparable to the corresponding period in 2019, total funds raised increased by 24 percent, bolstered by several sizeable US-listed, Chinese-based firms completing secondary listings during the year under the new listing regime launched in 2018. The above-mentioned US-listed, China-based companies raised a total of HKD131.3 billion, representing approximately 34 percent of funds raised for 2020. Main Board GEM Total funds raised (HKD No. of IPOS Average deal size No. of IPOS Total funds raised (HKD billion) billion) < HKD 1 billion HKD 1-5 billion > HKD 5 (HKD No. of IPOS Average deal size (HKD billion billion) billion) 2020 Full year 389.3 132 2.95 70 41 21 0.6 8 0.08 2019 Full year 313.3 146 2.14 102 34 10 1.0 15 0.07 2018 Full year 282.9 130 2.18 90 30 10 5.1 75 0.07 2017 Full year 122.6 80 1.53 59 15 60 5.9 80 0.07 2016 Full year 190.6 72 2 2.65 48 14 10 4.6 45 55 0.10 Source: HKEX and KPMG analysis Note: All analysis is based on a combination of data as at 6 December 2020 and KPMG estimates, unless otherwise stated. Excludes listings by introduction. KPMG © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved. 19 19#21Hong Kong IPOs: Main Board - sector analysis 2020: Top 5 sectors - by number of IPOs Total number of IPOS = 132 35% 30% 31% 25% 20% 15% 17% 17% 13% 10% 12% 10% 5% 0% Infrastructure/ TMT Real Estate Healthcare / Consumer Life Sciences Markets Industrial Others ✓ " Infrastructure/Real Estate The sector led the market in terms of the number of listings and ranked fourth in terms of total proceeds. The sector is expected to remain active in the market for the coming year, as over a quarter of the pipeline is from this sector. Stimulated by the expanded infrastructural needs for Hong Kong and the Greater Bay Area, including development of the city's Cyberport and Science Park, pipeline and fundraising actives from this sector are expected to remain solid for the coming years. Source: HKEX and KPMG analysis 2019: Top 5 sectors - by number of IPOs Total number of IPOS = 146 30% 25% 27% 20% 15% 15% 15% 10% 12% 10% 5% 21% 0% Infrastructure / TMT Real Estate Consumer Markets Healthcare / Industrial Life Sciences Others Note: All analysis is based on a combination of data as at 6 December 2020 and KPMG estimates, unless otherwise stated. KPMG Source: HKEX and KPMG analysis Technology, Media & Telecoms The TMT sector ranked first in terms of total funds raised and second in terms of the number of new listings. Three out of the Top 10 IPOs are from the TMT sector. Four US-listed, China-based TMT companies - NetEase, JD.com, Baozun Inc. and GDS Holdings Limited - have completed their secondary listings during the period, raising a total of HKD77 billion, comprising 20 percent of total funds raised in the Hong Kong market. Market demand for distance-based services has been expanding due to the COVID-19 outbreak, this includes teleconferencing, virtual classrooms and online trading platforms. Business opportunities and funding needs for companies specialising in these services are expected to keep growing considerably. © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved. 20#22Hong Kong IPOs: Main Board - sector analysis (Cont'd) 30% 20% 10% 2020: Top 5 sectors - by total funds raised 25% 25% 17% 15% Total funds raised = HKD 389.3B 5% 13% 0% TMT Healthcare / Life Sciences Consumer Markets Infrastructure / Financial Real Estate Services Others Source: HKEX and KPMG analysis + Healthcare/Life Sciences The sector ranked second in terms of funds raised and third in terms of the number of IPOs. Listings from the healthcare/life sciences sector contributed 25 percent of funds raised for the year to date, including 14 companies listed under Chapter 18A, raising an aggregate of HKD41.1 billion, representing 11 percent of total funds raised during the period. There are currently 19 companies in the pipeline applying for a Hong Kong listing, this includes companies engaged in the development of drugs and biological products, genetic testing services, hospitality services, operation of clinics and dental services, etc. With the healthcare/life sciences industry continuing to develop, funding needs are expected to expand for cancer treatments, autoimmune disease treatments, medical devices etc. 40% 2019: Top 5 sectors - by total funds raised Total fundraising = HKD 313.3B 35% 30% 20% 10% 22% 13% 13% 10% 7% 0% TMT Consumer Markets Healthcare / Life Sciences Infrastructure/ Real Estate Financial Services Others Note: All analysis is based on a combination of data as at 6 December 2020 and KPMG estimates, unless otherwise stated. KPMG Source: HKEX and KPMG analysis Consumer Markets The sector ranked fourth in terms of funds raised and third in terms of the number of IPOs. Fast food franchise operator Yum China Holdings completed a secondary listing and raised a total of HKD17.3 billion in September this year. Among 17 active applicants in the Main Board pipeline as of 6 December 2020, 10 of them are engaged in the sales of consumer goods, four of them are engaged in food and beverage businesses. © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved. 21 21#23Top 10 largest Hong Kong IPOS 2020 Company Proceeds (HKD billion) Sector 1 JD.com SW 34.6 2 JD Health International Inc. # 31.0 TMT Healthcare/ Life Sciences 3 NetEase, Inc. - S 24.3 TMT 4 Yum China Holdings, Inc. - S 17.3 Consumer Markets 5 China Bohai Bank Co., Ltd. 15.9 Financial Services 6 GDS Holdings Limited - SW 14.9 TMT 7 Evergrande Property Services Group Limited # 14.3 Industrial 8 Hangzhou Tigermed Consulting Co., Ltd. - H Shares. 12.3 Healthcare/Life Sciences 9 China Resources Mixc Lifestyle Services Limited # 12.3 Consumer Markets 10 New Oriental Education & Technology Group Inc. - S 11.6 Education # Expected to list by the end of 2020. Funds raised estimated is based on mid price. Source: HKEX and KPMG analysis 2019 Company Proceeds (HKD billion) Sector 1 Alibaba Group Holding Limited - SW 101.1 TMT 2 Budweiser Brewing Company APAC Limited 45.1 Consumer Markets 3 ESR Cayman Limited 14.1 Infrastructure / Real Estate 4 Shenwan Hongyuan Group Co., Ltd. 9.1 Financial Services 5 Hansoh Pharmaceutical Group Company Limited 9.0 Healthcare/ Life Sciences 6 Topsports International Holdings Limited 9.0 Consumer Markets 7 China Feihe Limited 6.7 Consumer Markets 8 Bank of Guizhou Co., Ltd. - H Shares 5.5 Financial Services 9 Poly Property Development Co., Ltd. - H Shares 5.4 Infrastructure / Real Estate 10 Pharmaron Beijing Co., Ltd. 5.3 Healthcare / Life Sciences Note: All analysis is based on a combination of data as at 6 December 2020 and KPMG estimates, unless otherwise stated. Excludes listings by introduction. Source: HKEX and KPMG analysis KPMG Funds raised by top 10 IPOS 2020: HKD 188.5 billion ~ 49% of total proceeds 2019: HKD 210.3 billion ~ 67% of total proceeds © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved. 242 22#24• • • Hong Kong IPOs: 2021 outlook Market sentiment for 2021 will continue to be affected by global political, social and economic uncertainties, such as the development of the pandemic, Sino-US relations and the global monetary environment. Yet, we remain optimistic about the Hong Kong IPO market and the bourse will continue to be a top listing destination in 2021 due to the following reasons: There is growing interest from issuers and investors for homecoming listings as evidenced by nine US-listed Chinese companies that have completed its secondary listings in Hong Kong this year. Moreover, the bourse announced a plan to normalise the eligibility requirements for Greater China issuers without weighted voting rights (WVR) structures to secondary list in Hong Kong under Chapter 19C, proposing to revise the minimum market capitalisation requirement to USD400 million (~HKD 3 billion) and remove the "innovative company" requirement. The plan, if finalised and implemented, would allow more homecoming listings, with potentially 26 more Greater China Issuers eligible under the proposed new requirement. On enhancing Hong Kong's status as an international financial centre, the Central Government supports further deepening mutual access between the Mainland and Hong Kong markets. Pre-profit biotechnology companies listed in Hong Kong and stocks listed on the STAR Market that meet certain prescribed criteria will be included in the scope of eligible securities under the Stock Connect. The trend of homecoming and biotech listings further stimulates the change in the composition of Hong Kong's market, moving from the traditional base of real estate and financial services to a base of new economy listings, such as technology, biotech and e-commerce. The growing ecosystem for new economy companies would attract more companies of the same kind to follow suit and make Hong Kong an even more attractive international capital-raising venue in the new era. Benefitting from the new listing chapter launched in 2018, Hong Kong has been serving strong investor demand for high quality healthcare listings such as companies engaged in research and development of cancer treatments, autoimmune disease treatments, medical devices, etc. Following the strengthened ecosystem in Hong Kong with more biotech-experienced investors, investment bankers, lawyers, research analysts and financial advisers, we expect more companies to follow suit in the coming year. J Irene Chu Partner New Economy and Life Sciences KPMG China KPMG © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved. 23#25☑ Stock Connect KPMG © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved. 24 224#26Average Daily Turnover Sep-19 Oct-19 40.0 Stock Connect ☐ Hong Kong Stock Exchange reached an agreement with the Shanghai Stock Exchange and the Shenzhen Stock Exchange on the Stock Connect inclusion arrangements for eligible pre-revenue biotech companies listed in Hong Kong, as well as for eligible A-shares listed on the STAR Market. This points to the regulators' continuing efforts to enhance the mutual market access programme, ensuring the continued healthy development of the capital markets of Mainland China and Hong Kong. Northbound investments have remained active, highlighting a heightened interest in Chinese securities, as well as confidence in the resilience of the Chinese capital markets amid global uncertainties. In addition, the FTSE Russell began including A-shares in its index; MSCI completed its previously announced phased weighting increase of China A-shares, or yuan-denominated mainland Chinese stocks. These moves are expected to further stimulate northbound trading. The Southbound Trading Investor Identification Regime was successfully rolled out in January 2020, facilitating enhanced orderly operation and regulation of Stock Connect. Southbound investment: average daily turnover HKD billion Northbound investment: average daily turnover RMB billion 35.0 30.0 25.0 12.1 20.0 15.0 9.8 9.4 9.2 10.0 5.7 5.1 16.1 16.6 5.0 10.8 11.3 6.3 7.1 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 April-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Southbound sell trades Oct-20 Dec-20 Nov-20 Average Daily Turnover Sep-19 Oct-19 Nov-19 160.0 140.0 120.0 100.0 80.0 60.0 45.9 45.1 43.9 27.1 40.0 20.8 19.8 50.8 20.0 40.8 40.5 43.6 24.0 23.7 Southbound buy trades * Analysis is based on data as at 6 December 2020 KPMG Nouthbound buy trades Nouthbound sell trades Source: HKEX 25 © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved. Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Sep-20 Aug-20 Oct-20 Nov-20 Dec-20#27Contact us Paul Lau Partner, Head of Capital Markets/Professional Practice KPMG China +852 2826 8010 [email protected] Louis Lau Partner, Capital Markets Advisory Group KPMG China +852 2143 8876 [email protected] Mike Tang Partner, Capital Markets Advisory Group KPMG China +852 2833 1636 [email protected] Irene Chu Partner, Head of New Economy & Life Sciences KPMG China +852 2978 8151 [email protected] Terence Man Partner, Capital Markets Advisory Group KPMG China +86 (10) 8508 5548 [email protected] Elton Tam Director, Capital Markets Advisory Group KPMG China +852 2978 8188 [email protected] KPMG © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved. 26 26#28KPMG in kpmg.com/socialmedia The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved. Printed in Hong Kong, China. The KPMG name and logo are registered trademarks or trademarks of KPMG International.