CHINA investment banking activity generated US$3.51 billion worth of fees during the first quarter of 2020, representing a minimal 1.1% decline from the previous year’s record start. This was the second highest ever first quarter investment banking fees generated since record gathering on fees began in 2000 and was driven by the higher fees earned from the equity capital markets (ECM) and debt capital markets (DCM) transactions, which helped offset the bigger decline in fees recorded for M&A and syndicated loan deals.

Figures released by Refinitiv on April 7 showed that DCM underwriting fees, which accounted for 65.7% of the total investment banking fees, amounted to a record high US$2.3 billion, exceeding last year’s record start by 0.5%. Primary bond issuance from China-domiciled issuers remained strong and raised US$461.7 billion during the first quarter of 2020, representing a minimal 0.9% drop from the previous record start of US$465.8 billion. This came as the number of bond issuance saw its busiest first quarter period ever with 1,511 deals, which were up 19.4% year-on-year.

By sector, the volume from government and agencies contributed 43.8% to China’s bond proceeds with US$202.4 billion, down 7.9% from the corresponding period in 2019. Financials accounted for 31.9% market share totalling US$147.4 billion (up 5.1%), including the US$11.4 billion perpetual bonds issued by Postal Savings Bank – the largest bond offering out of Asia so far this year.

Chinese banks turned to issuing perpetual bonds during the first quarter as they raised a total of US$20.6 billion in a move to replenish their capital requirements. In total, Chinese perpetual bond offerings amounted to a record high US$33 billion, up 148.9% from the same period a year ago.

ECM underwriting fees, on the other hand, grew faster at 28% from the first quarter of 2019 and totalled US$753.2 million even as Chinese equity and equity-linked proceeds plummeted 20.1% to US$27.9 billion. This was a four-year low in terms of proceeds, though the number of equity issuances rose 21.4% as issuers kept the deal sizes relatively smaller.

The total initial public offerings (IPOs), including first time listings, issued by China-domiciled companies started strong and raised an aggregate amount of US$11 billion, up 80.8% in proceeds from the first quarter of 2019, as the number of IPOs surged 55.8% from a year ago. This was the highest first quarter period for Chinese IPOs since 2017 when they amounted to US$13.3 billion from 145 transactions.

A-share IPOs raised US$9.2 billion, up 174.4% from the year before, alongside a 96.3% rise in the number of A-share issuances. Shanghai Stock Exchange’s STAR Market, launched in July 2019, accounted for 41.9% of the A-share IPO proceeds amounting to US$3.8 billion.

Meanwhile, proceeds from Chinese IPOs and new listings in Hong Kong (both on the main board and Growth Enterprise Market or GEM) fell 40% from last year to US$1.6 billion, despite a 15% rise in the number of IPOs. Beijing-Shanghai High Speed Railway raised US$4.4 billion through an IPO in January, making it the biggest IPO globally for the first quarter of 2020.

Follow-on offerings also recorded an uptick, raising US$9.9. billion in proceeds, which were up 27.7% year-on-year. In contrast, Chinese convertibles, or equity-linked issuance slowed down this year and fell to US$7 billion for a 66.9% drop in proceeds after posting a record start in the first quarter of 2019.

M&A involving China recorded its lowest start to a year since 2014 in terms of value as headwinds continued to stall deal-making activity – from regulatory hurdles, geopolitical tensions, protectionist sentiments to the current global Covid-19 pandemic. Overall, China involvement M&A transactions totalled US$87.4 billion in the first quarter of 2020, representing an 11.5% decline from a year ago.

Chinese outbound acquisitions dropped significantly by 81.6% to US$2.2 billion compared a year ago – making it the lowest first quarter period since 2005 when it amounted to US$1.6 billion. Foreign firms acquiring Chinese companies amounted to US$6.4 billion, down 47.7% - the lowest start to a year for inbound M&A activity in China since 2012 when the value totalled US$3.7 billion.

Meanwhile, domestic M&As stood at US$74.2 billion in the first quarter of 2020, up 4.2% from a year ago, with the financial sector accounting for a large share of the activity.

Among banks, CITIC topped China’s investment banking fee league table with a total of US$253.6 million, followed by Bank of China (US$215.8 million), Industrial and Commercial Bank of China (US$162.5 million), China International Capital Corporation (US$150.6 million) and China Construction Bank (US$148.7 million).

Two Wall Street banks managed to barge into the top 10 fee league table to demonstrate the strength of their China franchise. Credit Suisse was able to generate fees amounting to US$128.2 million, up 126.5% year-on-year, while Morgan Stanley earned fees amounting to US$110.5 million, or an increase of 67.9%.