The gap between the performance of the Mainland and Hong Kong IPO markets is expected to narrow from the second quarter onwards, according to a recent report by Deloitte China.

New Mainland listings in the first quarter of 2017, encouraged by the regulator, surpassed the number of listings in the Hong Kong market. With the macro-economic outlook becoming clearer, Deloitte predicts that the gap between the performance of Mainland and Hong Kong IPO markets will narrow from the second quarter onwards.

In the first quarter ended March 31 2017, Hong Kong completed 39 new listings raising HK$13.3 billion, a 105% rise in the number of IPOs, but a 53% drop in the funds raised, against 19 IPOs raising HK$28.0 billion in the same quarter in 2016. Deloitte's IPO forecast for Hong Kong in 2017 is at least 120 IPOs raising funds of about HK$160 billion.

"In another few months, when the market has become used to US interest rate hikes, China’s economic performance stabilizes, impacts of the Brexit subside and major elections in the Eurozone are over, the economic environment is going to zest up and Hong Kong is expected to see larger new listings from the Chinese financial services and technology, media and telecommunications sectors. These offerings are going to be those benefiting from ongoing reform in the Chinese financial sector and companies thriving in the new economy," says Edward Au, co-leader, national public offering group of Deloitte China.

The IPO forecasts for the Chinese Mainland in 2017 are between 380 and 420 in number and raising between 250 and 280 billion yuan. Most of them will be from the manufacturing and technology sectors and there will be about two to three large potential listings destined for Shanghai.

"Deloitte is positive about the outlook of the Chinese IPO market. In addition to efforts to speed up IPOs, the regulator stepping up scrutiny of backdoor listing, refinancing and speculative activities among listed companies and pushing forward with reform to build a multi-tier capital market are going to see the A-share market shape up and become healthier in the long run," says Anthony Wu, leader of China A-share capital market national public offering group at Deloitte China.