In Depth: Hong Kong IPO Market Stages Comeback After Dismal 2023

The investors in the Hong Kong IPO of Chinese cosmetics firm Mao Geping Cosmetics Co. Ltd. experienced significant gains on December 10, as the company's shares surged up to 92% before closing 77% higher, marking the best first-day performance in four years. This indicates a recovery from the three-year slump in IPOs on the Hong Kong stock market. [para. 1][para. 2]

By December 8, 63 companies, primarily from mainland China, had been listed on the Hong Kong Stock Exchange (HKEX) in 2024, raising a total of HK$83 billion ($10.7 billion)—an increase of 80% compared to 2023. This achievement helped the exchange regain its position as the fourth globally in IPO fundraising. Most of this capital came from the latter half of the year, propelled by substantial deals like the four largest IPOs in the past two years. [para. 3]

The market saw a notable recovery from 2023 when the IPO market in the city slumped to its lowest in two decades, raising only HK$46.3 billion through 73 listings due to weak market sentiment. [para. 4] According to experts, market activity and sentiment have improved markedly over the past six months. [para. 5] Forecasts from KPMG and EY suggest that the IPO market in Hong Kong will continue to recover in 2025, with total fundraising predicted to reach between HK$100 billion and HK$120 billion, which could return the bourse to one of the top three globally for IPO fundraising. [para. 6]

The revival in the Hong Kong IPO market began in September with the IPO of Midea Group Co. Ltd., which was the largest in Hong Kong over the past three years and the second-largest globally in 2024. [para. 7] Subsequent major IPOs, like those of China Resources Beverage, Horizon Robotics, and SF Holding, each generated more than HK$5 billion, a stark contrast to 2023 when only one company surpassed this threshold. [para. 8]

The resurgence follows the introduction of favorable policies by the HKEX and Chinese regulators that seek to support Hong Kong's status as an international financial center and fuel Chinese companies' international ambitions. [para. 9] Notably, this year, three companies listed under the new Chapter 18C of the exchange's listing rules, designed for money-losing specialist technology firms, and the SPAC mechanism saw its first merger transaction. [para. 10]

To ease the listing process, new regulations for overseas listings were enacted, standardizing procedures and making the process more transparent and straightforward. [para. 11] Moreover, efforts to enhance cooperation between the Hong Kong and Chinese markets were evident in the support for Midea and SF Holding’s IPOs as reported by the China Securities Regulatory Commission (CSRC) which has also met with international banks and law firms to expedite offshore listings. [para. 12]

The successful listing of Midea in Hong Kong has been influential for other mainland companies planning IPOs in Hong Kong. [para. 13] Mining companies are now considering Hong Kong to raise funds, as they are critical for infrastructure development in line with China’s Belt and Road Initiative. [para. 14] Additionally, the slowdown in the mainland’s IPO activity has led many firms to opt for listing in Hong Kong instead, enhancing the city's IPO pipeline. [para. 15]

The Hong Kong government has been facilitating this trend by adjusting regulations to improve the approval process and make it quicker and more efficient, aiming to attract more mainland companies to list. [para. 23][para. 24]