Hong Kong’s IPO Boom: Gateway or Risk Trap for Investors?

Hong Kong market’s IPO reforms, efficient this month, reshape how offers are priced and who will get entry. For traders, this marks a pivotal shift in market integrity and allocation equity. The impression is already seen. On this yr’s first half, corporations itemizing on Hong Kong Exchanges and Clearing Restricted (HKEX) raised $14 billion (HK$109 billion). Mainland China battery producer and expertise firm CATL’s $4.6 billion providing, the most important IPO worldwide to date this yr, underscores investor urge for food for Mainland Chinese language listings.

For traders, the surge alerts each alternative and threat: Hong Kong has reasserted itself because the offshore gateway for Mainland Chinese language corporations, however with that dominance comes heavy publicity to its economic system.

The dimensions of the rebound marks a pointy break from the final three years, when world tightening, weak sentiment, and geopolitical shocks saved Hong Kong’s fairness market subdued. What modified in 2025 was a convergence of push components inside Mainland China (deflation, tighter onshore guidelines, and slowing development) with pull components in Hong Kong (reforms and capital flexibility making town the pure outlet). Collectively, these forces clarify why Mainland Chinese language corporations have returned in such energy, and why the resurgence of Hong Kong’s trade seems completely different from previous cycles.

Determine 1. HKEX IPO Tendencies

Supply: HKEX, SEC. Observe: Minor variations in decimal values between charts resulted from FX conversion rounding.

A Market Reawakens: The Drivers Behind HKEX’s 2025 IPO Growth

After three years of market slowdown amid world financial tightening and geopolitical fractures, the capital market of Hong Kong has witnessed a exceptional revival. The placing turnaround is pushed predominantly by privately owned Mainland Chinese language corporations in search of offshore capital, which consists of 90% of the entire fundraising. HKEX stands out as the highest most well-liked itemizing venue for Mainland Chinese language corporations in comparison with its onshore counterparts.

Since Mainland China’s financial reform within the late 20^th century, three onshore inventory exchanges have been established: first Shanghai, adopted by Shenzhen, after which Beijing. Collectively, these exchanges turned engines of capital formation, enabling state-owned enterprises (SOEs), personal corporations, and revolutionary startups to boost capital at scale, as Mainland China’s economic system bloomed from the Nineties by way of the 2010s.

Nevertheless, the political and financial nature of the Mainland China market, with capital controls and strict regulatory necessities, limits overseas entry. These components contributed to the attraction of HKEX as an offshore itemizing venue and a degree of entry for overseas traders to realize publicity to the Mainland China capital market.

Determine 2. Comparability between Higher China Exchanges

Supply: ExpatInvestChina.

Hong Kong SAR, established below British rule and preserved after the 1997 handover below “One Nation, Two Programs,” retains options that set it other than mainland venues. This consists of frequent regulation construction, world entry, and free capital flows. These options proceed to make HKEX the pure offshore gateway for Mainland Chinese language corporations.

Push Elements from China

Mainland China’s post-COVID slowdown, marked by deflation and property market challenges, has left personal corporations squeezed by worth wars and shrinking margins. With out state backing, many have little selection however to hunt overseas capital, a dynamic pushing listings to Hong Kong.

Mainland China is a policy-driven economic system. In 2024, the China Securities Regulatory Fee (CSRC) tightened IPO approvals, particularly for unprofitable or early-stage corporations. In consequence, onshore fundraising collapsed to $9.3 billion throughout 101 IPOs, down 83% yr over yr. Within the first half of 2025, mainland exchanges raised solely $4.7 billion, lower than one-third of what corporations listed on HKEX raised in the identical interval.

Pull Elements from Hong Kong

The elemental attraction of HKEX over its onshore counterparts lies in its totally open nature, with its forex, the Hong Kong greenback, as a freely convertible forex pegged to the US greenback. The free circulate of capital and convertibility into exhausting forex are important for any firm working on a world scale. That can also be true for early-stage traders and founding members of the privately owned corporations contemplating exit methods.

Hong Kong is thought to be a particular administrative area by Mainland China, and the A+H itemizing mannequin is extremely inspired. That’s, twin listings the place a mainland Chinese language firm has its shares traded on each a inventory trade in mainland China (A-shares) and Hong Kong’s trade (H-shares). On this yr’s first half, 21 out of 44 IPOs are A+H listings, a rise of 110% YoY.

HKEX Structural Reforms

Current reforms have reshaped how corporations come to market in Hong Kong and the way traders can entry them. The brand new Expertise Enterprises Channel[1] gives a confidential quick monitor for specialist tech and biotech corporations, sectors closely backed in China. A+H listings[2] can now be authorised in simply 65 days, accelerating provide. On the similar time, HKEX lowered its public float requirement from 15% to 10% and lower the retail allocation cap from 50% to 35%.

For traders, these adjustments imply two issues: sooner deal circulate, but additionally much less safety. Giant Mainland Chinese language issuers can now convey sizable choices to market extra rapidly whereas retaining extra management, which advantages institutional allocations on the expense of retail entry. Decreased float and tighter retail caps might enhance pricing effectivity within the quick run, however they heighten considerations about liquidity and governance in the long term. Briefly, entry has improved for giant traders, whereas dangers for smaller traders have elevated.

What it Means for Buyers

For traders, Hong Kong’s IPO increase presents each alternative and threat. On the upside, HKEX affords entry to Mainland China’s most dynamic personal corporations. On the draw back, the market is extremely concentrated: roughly 80% of HKEX’s capitalization is tied to Mainland Chinese language issuers, leaving traders uncovered to adjustments in Chinese language coverage and geopolitical occasions. Persistent valuation reductions versus world friends elevate additional questions on long-term returns. The trade-off is evident: Hong Kong gives a gateway to Mainland China’s development tales, however just for traders keen to simply accept focus and volatility as the value of entry.

That is the primary in a three-part collection. Half II will discover how Hong Kong’s positioning stacks up in opposition to world exchanges, and what which means for long-term capital allocation; Half III shall be an advocacy-focused joint piece with CFA Society Hong Kong, analyzing the current reforms, IPO worth discovery, and open market necessities.

References
Hong Kong’s IPO Growth Roars Again: Contained in the $14 Billion First-Half Surge and What’s Driving It
Hong Kong’s ECM Panorama in 1 2025

HKEX Posts Document Q1 Revenue Amid Surge in IPOs and Buying and selling Quantity – Beijing Instances

Chinese language Mainland and HK IPO Markets 2025 mid-year – KPMG China

What China’s itemizing frenzy in Hong Kong means for traders | The Straits Instances

China’s Belt and Street funding hits report highs in 2025, pushed by power, mining and tech sectors – Griffith Information

PwC Hong Kong: PwC: 2025 poised to be essentially the most lively IPO marketplace for Hong Kong in 4 years; fundraising anticipated to rank no.1 globally

Mainland China IPOs Drop in 2025 Amidst Regulatory Crackdown – Information and Statistics – IndexBox

China Inventory Exchanges In contrast

[1] Expertise Enterprises Channel (TECH): Launched in Might 2025 collectively by HKEX and SFC, Expertise Enterprises Channel (TECH), designed to assist Specialist Expertise Firms and Biotech Firms to streamline the IPO processes.

[2] Accelerated Timeframe for Eligible A-share Listed Firms: Introduced on Oct 18, 2024 collectively by HKEX and SFC, Joint Assertion on Enhanced Timeframe for New Itemizing Software Course of