Navigating Hong Kong's Post-Lockup Volatility: Strategic Entry Points Amid Premium Rebalancing

The expiration of lockup periods for dual-listed stocks in Hong Kong has emerged as a pivotal event for investors, reshaping capital flows and valuation dynamics. As recent developments illustrate, the interplay between regulatory reforms, corporate strategy, and market sentiment creates both risks and opportunities. This analysis examines the evolving landscape, focusing on capital reallocation strategies and long-term value creation in the context of post-lockup volatility.

The Lockup Expiry Catalyst: Case of CATL

Contemporary Amperex Technology Co. Ltd. (CATL) provides a compelling case study. Following the expiration of its six-month lockup period on November 19, 2025, the Hong Kong-listed shares of this battery giant faced immediate selling pressure, with approximately 77.5 million shares becoming eligible for sale. This event coincided with a 15% decline in its Hong Kong-listed shares since early October, while mainland-listed shares gained momentum. The divergence highlights the premium rebalancing process, as cornerstone investors and institutional players reassess their positions.

Analysts note that the lockup expiry could accelerate the convergence of valuations between Hong Kong and onshore markets. JPMorgan Chase & Co. recommended selling Hong Kong-listed CATL shares and buying their Shenzhen-traded counterparts, anticipating a narrowing of the valuation gap. Such arbitrage opportunities underscore the role of capital reallocation in post-lockup scenarios, where liquidity constraints and investor behavior drive short-term volatility.

Policy Reforms and Capital Reallocation Frameworks

Hong Kong's regulatory environment has evolved to facilitate cross-border capital flows, enhancing its role as a hub for dual-listed companies. The Hong Kong Exchanges and Clearing (HKEX) introduced the "Special Tech Chapter" and Chapter 18C reforms in 2025, lowering the market capitalization threshold for specialized tech firms to HKD 6 billion and reducing review times by 30%. These changes have attracted high-quality Chinese enterprises, particularly in biotechnology and hard tech sectors, by streamlining access to international capital.

The filing-based system for overseas listings of domestic enterprises further amplifies this trend. For example, CATL's HKD 35.6 billion Hong Kong IPO-42% of which was subscribed by international capital-demonstrates the strategic importance of Hong Kong as a platform for global expansion. Proceeds from such listings often fund overseas projects, as seen in CATL's allocation of 90% of its Hong Kong IPO proceeds to its Hungarian factory. This capital reallocation not only supports global operations but also revalues core A-share assets, creating a feedback loop of cross-border value creation.

Long-Term Value and Structural Trends

While post-lockup volatility is often short-lived, the long-term value of dual-listed stocks hinges on structural trends. The complementarity between A-share and H-share markets remains a cornerstone of this dynamic. A-shares continue to serve as the primary listing platform for high-end manufacturing and hard tech sectors, while Hong Kong captures subsequent opportunities through secondary listings and cross-border financing. As of June 2025, 33 companies had pursued dual A+H listings, with nearly 150 in the pipeline.

Investors must also consider industrial synergies driven by globalization. For instance, the overseas expansion of new energy equipment and consumer brand supply chains creates opportunities for dual-listed firms to leverage Hong Kong's capital markets. Additionally, policy tailwinds-such as the potential inclusion of CATL in the Hang Seng Tech Index-can provide post-lockup support, mitigating short-term selling pressure.

Strategic Entry Points and Risk Mitigation

For investors navigating post-lockup volatility, three strategic entry points emerge:
1. Early-stage positioning in sectors aligned with policy reforms, such as AI chips and gene therapy, offers growth potential amid regulatory tailwinds.
2. Arbitrage opportunities in A/H valuation convergence and IPO subscriptions present low-risk, high-reward scenarios, particularly for firms like CATL where premiums are expected to narrow.
3. Industrial synergies benefit companies with global expansion plans, such as those investing in overseas manufacturing hubs, by leveraging cross-border capital reallocation and enhanced liquidity.

However, risks persist. High share concentration among cornerstone investors, as seen in CATL, can exacerbate short-term volatility. Investors should prioritize firms with robust fundamentals and diversified ownership structures to mitigate such risks.

Conclusion

Hong Kong's dual-listed stocks are at a crossroads, where post-lockup volatility reflects broader shifts in capital reallocation and valuation dynamics. While immediate selling pressure may test market resilience, the interplay of regulatory reforms, corporate strategy, and global demand positions these firms for long-term value creation. By focusing on strategic entry points and leveraging arbitrage opportunities, investors can navigate this volatility with confidence, capitalizing on the evolving landscape of Asia's financial markets.