HKEX: Riding the IPO Surge to Strategic Dominance in Asia's Capital Markets

The Hong Kong Exchanges and Clearing (HKEX) is positioned at the epicenter of a transformative wave reshaping global capital markets. As the region's IPO activity surges to record levels, HKEX's strategic pivot toward tech-led listings and dual listings is unlocking unprecedented growth opportunities. With regulatory tailwinds, valuation upside, and its unique role as China's gateway to global capital, HKEX stands as a compelling buy for investors seeking exposure to Asia's innovation economy.

The IPO Surge: HKEX's Revenue Engine Ignites

Hong Kong's IPO market has exploded in 2025, with Q1 volumes reaching 15 deals raising HK$18.2 billion—a 287% jump in proceeds compared to Q1 2024. This surge is not merely cyclical but structural, driven by hard tech firms like battery giant Contemporary Amperex Technology Co. (CATL), which raised HK$13.8 billion in its May 2025 listing—the year's largest global IPO. Meanwhile, dual listings (A+H structures) have surged to 25 active applications by April 2025, up from just 3 in late 2024. These trends are directly tied to HKEX's reforms, including its Technology Enterprises Channel (launched May 2025), which fast-tracks listings for AI, semiconductors, and biotech firms with valuations exceeding HK$10 billion.

The stock has risen 35% year-to-date as IPO volumes hit decade highs, but its valuation remains undemanding. At a P/E of 18x versus its five-year average of 22x, HKEX is priced for stagnation, not growth. With fee revenue poised to climb alongside listings, this gap presents a buying opportunity.

Regulatory Tailwinds: HKEX as China's Innovation Hub

Beijing's push to develop “new productive forces” in tech and green energy has made HKEX the preferred venue for mainland firms seeking global capital. The fast-track review channel introduced in April 2024—cutting approval times to 65 days for compliant firms—has streamlined listings for H-share companies (vs. red-chip structures). This aligns with CSRC reforms favoring firms with verifiable technological barriers and sustainable R&D spend, ensuring only the strongest innovators access markets. For example, Yunji Technology (March 2025 filing), the “first AI Agent IPO,” exemplifies this shift toward hard tech differentiation.

Meanwhile, geopolitical risks—such as U.S. restrictions on Chinese tech firms—have accelerated the shift to Hong Kong. With SPAC activity cooling globally, traditional IPOs are regaining prominence, and HKEX is the clear beneficiary. Its low-cost, high-liquidity market offers Chinese firms a safer alternative to U.S. listings, where data security and audit rules remain contentious.

Valuation Upside: Capturing the Innovation Economy's Growth

HKEX's revenue model is inherently leveraged to IPO activity. Every 10% increase in listing fees boosts earnings by 5-7%, and the current pipeline—boasting HK$72 billion raised through May 2025—suggests earnings could hit HK$12 billion by year-end, up 20% from 2024. Key catalysts include:1. Tech Sector Dominance: AI, semiconductors, and EV firms now account for 60% of new listings, commanding higher fees than traditional sectors.2. Dual Listings: A+H structures contribute double the revenue of standalone listings due to dual trading fees.3. Global Liquidity: With the Hang Seng Index trading within 22,500–24,000, HKEX's trading volumes remain robust, underpinning recurring revenue.

The tech sector's share has jumped from 15% in 2023 to 45% in Q1 2025, signaling a permanent shift toward innovation-driven listings.

Why Now? The Underappreciated Growth Story

Investors have yet to fully price in HKEX's strategic advantages:- Regulatory Moat: HKEX's reforms are irreversible. The Technology Enterprises Channel ensures it remains the首选 venue for China's tech elite.- Geopolitical Hedge: As U.S.-China tensions persist, Hong Kong's role as a neutral, Chinese-aligned market grows irreplaceable.- Valuation Discount: At 0.8x book value, HKEX trades below its five-year average of 1.1x, despite record revenue visibility.

Investment Thesis: Buy the Bridge to Asia's Future

HKEX is the only pure-play exposure to Asia's tech-driven capital markets. With 2025 earnings poised to grow 20% and a 20% upside to fair value, now is the time to buy. The stock's low volatility (beta <1) adds defensive appeal. Risks—such as U.S.-China détente reducing listing demand—are mitigated by HKEX's entrenched position as China's preferred gateway.

Actionable recommendation: Accumulate HKEX shares at current levels. Set a target price of HK$450 (20% upside from current prices) based on 20x 2025E P/E. Monitor the CATL listing's post-IPO performance and any new policy reforms from Beijing or HKEX.

In a world of fragmented capital markets, HKEX is the indispensable bridge between China's innovation economy and global investors. This is a buy for the long term.