Hong Kong IPO Market Surges 220% in 2025, Driven by Overseas Investors

In 2025, the Hong Kong IPO market witnessed a remarkable surge, with overseas cornerstone investors emerging as the primary drivers of fundraising. According to a recent report, cornerstone investors contributed 42% of the total funds raised through IPOs in Hong Kong this year. Notably, two-thirds of this amount came from overseas investors, underscoring the growing interest of international capital in Chinese assets.

The report highlighted that in the first half of 2025, the Hong Kong main board completed 42 IPOs, raising a total of 1067 billion Hong Kong dollars, a year-on-year increase of over 220%. This figure places Hong Kong at the top globally in terms of IPO fundraising. Approximately 85% of these new stocks successfully attracted cornerstone investors before listing, with an average of 4.4 cornerstone investors per IPO. Over 40% of the projects attracted more than five cornerstone institutions. Major projects such as CATL (410 billion Hong Kong dollars) and Jiangsu Hengrui Medicine (98.9 billion Hong Kong dollars) were significant contributors to this fundraising surge, with overseas cornerstone investors playing a substantial role.

The resurgence of global long-term funds, including pension funds and sovereign wealth funds, has been a notable trend. After several years of portfolio adjustments, these funds have once again increased their allocations to Hong Kong stocks. The renewed confidence of overseas investors in Chinese assets is driven by factors such as attractive valuations, policy support, and the innovation-driven growth of the technology sector. Currently, Hong Kong stocks are trading at a discount of approximately 40% compared to the S&P 500, providing a "safety margin" for international investors.

The recovery of the Hong Kong IPO market is supported by several favorable factors. Regulatory and institutional improvements, including the Hong Kong Stock Exchange's relaxation of listing rules to support specialized technology companies and the return of Chinese companies listed in the U.S., have lowered financing costs for enterprises. Additionally, the demand for capital from industries such as new energy, artificial intelligence, and biopharmaceuticals has surged, with sectors like technology hardware and equipment, automotive components, and pharmaceuticals leading in fundraising. Companies like CATL and BYD have had a significant impact on this trend.

Global capital reallocation, driven by expectations of interest rate cuts by the Federal Reserve and geopolitical changes, has led to increased investment in emerging markets. Hong Kong, as a gateway to Chinese assets, has become a preferred destination for these funds.

It is predicted that the Hong Kong IPO market will remain active in the second half of the year, with the total fundraising amount expected to exceed 1500 billion Hong Kong dollars. The performance of IPOs post-listing is highly correlated with the proportion of shares held by cornerstone investors (30%-50%). High-growth potential technology stocks and stable-earning consumer stocks are expected to continue attracting significant investment.

The interconnection between the A-share and Hong Kong stock markets has strengthened. 20 A-share companies with high earnings growth potential (compound EPS growth rate of over 10% from 2024 to 2026) and reasonable valuations (PEG ratio less than 2 times) have been identified. These companies are expected to further activate cross-border capital flows as they plan to list in Hong Kong.

In addition to institutional investors, individual investors have shown a marked increase in interest in Hong Kong IPOs. The demand-supply ratio for Hong Kong IPOs this year averaged 9%, significantly lower than the 25% seen over the past five years, indicating an improvement in public risk tolerance. The enthusiasm of retail investors for new issues has driven several new stocks to achieve first-day gains of over 10%, with some popular stocks delivering returns of up to 41% within three months.