Hong Kong's IPO market is on fire — here's what's fueling the surge

The frenzy came after years of lackluster IPO activity in the city

The renewed interest is fueled by a confluence of factors, including Beijing's regulatory tailwinds, lackluster A- listings and delisting fears in U

Paul Yeung | Bloomberg | Getty ImagesInvestors and es' enthusiasm for Hong Kong's equity capital is roaring back, as Chinese companies flocked to the city for fundraising, sparking a frenzy in the market that had been forsaken in recent years

Outsized deals and a state-backed push for companies listed in the mainland exchanges to seek a listing in Hong Kong have thrust capital-raising volume to the strongest first half-year since 2021, according to data from data vider Dealogic

New listing volumes on the Hong Kong Stock Exchange jumped around eight times to $14 billion in the first half of this year, from just $1. 8 billion in the same period in 2024, according to Dealogic

That excluded SPAC listings, or special purpose acquisition companies established solely to raise capital through an IPO, with the aim of eventually acquiring or merging with another company

That puts the city on track to become the world's largest listing destination this year, surpassing the Nasdaq and the New York Stock Exchange

The frenzy came after years of lackluster IPO activity in the city amid post-pandemic risk-off sentiment and stuttering economic growth

In comparison, there were only 73 listings in 2023, raising just $5. 9 billion, according to HKEX data

The renewed interest is fueled by a confluence of factors, including Beijing's regulatory tailwinds, the muted pace of A- listings, ample market liquidity, and delisting fears in U. , driving mainland companies to raise funds in Hong Kong, according to Steven Sun, head of China equity strategy at HSBC

Watch now8:1108:11Hong Kong's IPO market is on fire; these 3 factors are driving the boom: HSBCThe China Connection"The IPO boom in the Hong Kong market is certainly driven by dual-listing of A-then-H [s]," said Sun

A-s refer to mainland-listed s, while H-s are those listed in Hong Kong. "More and more companies use the ceeds to fund their globalization strategy," Sun said, as the Hong Kong dollar is more fungible than the Chinese yuan in global

Beijing policy tailwindsA jump in Chinese equity prices last September, triggered by expectations of stronger economic stimulus, helped turn the tide on bearish narratives China

At the start of this year, the release of DeepSeek's low-cost but powerful model further fueled a rally in Chinese stocks as investors began to reassess China's capacity for innovation, spurring a rerating of Chinese equities. "Market valuations broadly have imved back to historical average levels, which vides a better backdrop for companies looking to fundraise," said Eugene Hsiao, head of China equity strategy at Macquarie

Hopes that Chinese authorities will ly unleash additional fiscal spending to shield the economy from any trade-related shock have further underpinned and investors' confidence

In an apparent shift to support the private sector, Chinese President Xi Jinping told the nation's top leaders in February that the country needs their help to der economic growth

That shift, coupled with the long-awaited apval by Beijing for mainland firms to list offshore, unleashed a wave of pent-up demand, particularly for high-quality, consumer-facing companies that are less exposed to geopolitical headwinds, said Lorraine Tan, director of equity re at Morningstar

Chinese securities regulator last year issued a slew of measures aimed at fast-tracking apval for eligible mainland companies to list in Hong Kong

Hong Kong regulators also launched a so-called "nology Enterprises Channel" in May to facilitate IPO apvals for specialist nology and bio companies, particularly those already listed in the mainland. "Policy encouraging leading corporate citizens to list in Hong Kong have vided a much-needed shot in the arm" in reviving IPO activity in the city, said Perris Lee, head of equity capital market at Dealogic

The southbound net inflows, tracked through the cross-border link Stock Connect scheme, surged to a record high in the April-June quarter, since the scheme was launched in 2014, according to Wind Information

In stark contrast, China's benchmark CSI 300 has barely budged this year, up 0. 2% year to date, according to LSEG data

That has mpted onshore investors to shift money to Hong Kong-listed equities, bolstering the Southbound inflows to account for nearly half of Hong Kong's daily stock turnover, according to Sun's estimates

A to H dual listingThese factors helped push a flurry of mainland China-traded companies to seek secondary listing in Hong Kong, including battery maker Contemporary Amperex nology

High-file companies that sought a primary listing in Hong Kong this year included bubble tea retailers Mixue Group, Guming Holding and ride-hailing platform operator Caocao Inc. "The appetite to raise offshore funds, especially in HKD, is a reflection of broader plans to expand into overseas," said Hsiao

Amid cutthroat competition at and flared-up trade tensions with the U. , Beijing has called on its leading companies to expand globally and diversify their manufacturing locations

Additionally, Hong Kong's market is more "inclusive" of emerging sectors, AI, renewable energy, digital consumption and bio, which align with mainland firms' needs, said Wei Li, head of multi-asset investments for China at BNP Paribas

The heightened U. -China tensions have made Hong Kong a preferred IPO destination for many Chinese firms, over concerns that the Trump administration could order a delisting from U. "A secondary listing essentially vides extra insurance for U. -listed Chinese companies in an unly event that a delisting becomes unnegotiable," said Lee, suggesting that companies are ly to have engaged financial advisors to hammer out a "plan B," with or without delisting.