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 influence is already seen. On this 12 months’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 biggest IPO worldwide thus far this 12 months, underscores investor urge for food for Mainland Chinese language listings.
For traders, the surge indicators each alternative and threat: Hong Kong has reasserted itself because the offshore gateway for Mainland Chinese language companies, however with that dominance comes heavy publicity to its financial system.
The size of the rebound marks a pointy break from the final three years, when world tightening, weak sentiment, and geopolitical shocks stored 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 the town the pure outlet). Collectively, these forces clarify why Mainland Chinese language companies have returned in such power, and why the resurgence of Hong Kong’s change seems completely different from previous cycles.
Determine 1. HKEX IPO Developments
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 Increase
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 putting turnaround is pushed predominantly by privately owned Mainland Chinese language corporations looking for offshore capital, which consists of 90% of the full fundraising. HKEX stands out as the highest most popular itemizing venue for Mainland Chinese language companies in comparison with its onshore counterparts.
Since Mainland China’s financial reform within the late twentieth century, three onshore inventory exchanges have been established: first Shanghai, adopted by Shenzhen, after which Beijing. Collectively, these exchanges grew to become engines of capital formation, enabling state-owned enterprises (SOEs), non-public companies, and modern startups to boost capital at scale, as Mainland China’s financial system bloomed from the Nineties by 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 some extent of entry for overseas traders to achieve publicity to the Mainland China capital market.
Determine 2. Comparability between Larger China Exchanges
Supply: ExpatInvestChina.
Hong Kong SAR, established beneath British rule and preserved after the 1997 handover beneath “One Nation, Two Techniques,” retains options that set it other than mainland venues. This consists of widespread legislation construction, world entry, and free capital flows. These options proceed to make HKEX the pure offshore gateway for Mainland Chinese language companies.
Push Components from China
Mainland China’s post-COVID slowdown, marked by deflation and property market challenges, has left non-public companies squeezed by value wars and shrinking margins. With out state backing, many have little alternative however to hunt overseas capital, a dynamic pushing listings to Hong Kong.
Mainland China is a policy-driven financial system. In 2024, the China Securities Regulatory Fee (CSRC) tightened IPO approvals, particularly for unprofitable or early-stage companies. Because of this, onshore fundraising collapsed to $9.3 billion throughout 101 IPOs, down 83% 12 months over 12 months. 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 Components from Hong Kong
The elemental attraction of HKEX over its onshore counterparts lies in its absolutely open nature, with its foreign money, the Hong Kong greenback, as a freely convertible foreign money pegged to the US greenback. The free movement of capital and convertibility into exhausting foreign money are important for any firm working on a world scale. That can be true for early-stage traders and founding members of the privately owned companies contemplating exit methods.
Hong Kong is thought to be a particular administrative area by Mainland China, and the A+H itemizing mannequin is very inspired. That’s, twin listings the place a mainland Chinese language firm has its shares traded on each a inventory change in mainland China (A-shares) and Hong Kong’s change (H-shares). On this 12 months’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] offers a confidential quick monitor for specialist tech and biotech companies, sectors closely backed in China. A+H listings[2] can now be authorised in simply 65 days, accelerating provide. On the identical time, HKEX lowered its public float requirement from 15% to 10% and lower the retail allocation cap from 50% to 35%.
For traders, these modifications imply two issues: quicker deal movement, but additionally much less safety. Giant Mainland Chinese language issuers can now carry sizable choices to market extra rapidly whereas retaining extra management, which advantages institutional allocations on the expense of retail entry. Lowered 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 Traders
For traders, Hong Kong’s IPO growth presents each alternative and threat. On the upside, HKEX gives entry to Mainland China’s most dynamic non-public corporations. On the draw back, the market is very concentrated: roughly 80% of HKEX’s capitalization is tied to Mainland Chinese language issuers, leaving traders uncovered to modifications in Chinese language coverage and geopolitical occasions. Persistent valuation reductions versus world friends increase additional questions on long-term returns. The trade-off is obvious: Hong Kong offers a gateway to Mainland China’s development tales, however just for traders prepared to just accept focus and volatility as the worth of entry.
That is the primary in a three-part sequence. Half II will discover how Hong Kong’s positioning stacks up towards world exchanges, and what which means for long-term capital allocation; Half III might be an advocacy-focused joint piece with CFA Society Hong Kong, analyzing the current reforms, IPO value discovery, and open market necessities.
ReferencesHong Kong’s IPO Increase Roars Again: Contained in the $14 Billion First-Half Surge and What’s Driving ItHong Kong’s ECM Panorama in 1 2025
HKEX Posts Report 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 Highway funding hits document 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 help 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
