The IPO market is expected to revive next year due to supporting policies and an improving economy after posting its worst performance in three years, industry watchers said Tuesday.

Funds raised through IPOs on the Shanghai and Shenzhen stock exchanges are expected to hit a three-year low of 103 billion yuan (US$16.6 billion) this year, down 63 percent from 2011, according to Ernst & Young.[Set Up Company Hong Kong]

A total of 154 companies went public on the domestic exchanges in the January-November period, compared with 281 for all of 2011.

"The weak economy, unstable equity market conditions and the poor performance of some IPO transactions undoubtedly impacted the confidence of investors," Chee Kong Lai,[Hong Kong Company Formation] assurance partner at Ernst & Young, said in Shanghai yesterday.

However, the accounting firm said IPO activity will regain momentum in the second quarter next year and become more dynamic in the second half, with total financing rising to 130 billion yuan.

More than 800 companies plan to launch IPOs on the Shanghai and Shenzhen bourses. They hope to raise 500 billion yuan.[Offshore Company Incorporation]