Has the Hong Kong stock IPO market changed?

Market rumors indicate that recently the Hong Kong Securities and Futures Commission (SFC) and the Hong Kong Exchanges and Clearing (HKEX) jointly issued a letter to all IPO (Initial Public Offering) sponsors, directly addressing the decline in quality and some non-compliance issues in recent listing applications, which has attracted widespread attention in the market.

In this regard, Caijing learned from HKEX that HKEX confirmed it had jointly sent a letter to sponsors with the SFC regarding matters related to listing applications.

It is reported that the letter detailed three core issues, including: poor quality of draft listing documents, insufficient verification, vague descriptions of business models, excessive use of promotional language, and selective presentation of industry data exaggerating market position; sponsors failed to effectively respond to regulatory inquiries, with some institutions even lacking understanding of the basic facts of the projects; disorder in the execution of processes during the offering stage, with key personnel missing or lacking professional competence, leading to frequent delays in the established timeline.

HKEX responded that in order to promote the vigorous development of the capital market, it is committed to ensuring that the review of new listing applications is conducted in a timely and rigorous manner. At the same time, HKEX is actively maintaining close communication with issuers, sponsors, and professional advisors to ensure that the submitted listing materials are complete and of high quality. HKEX will continue to work together with all parties to further enhance the quality of the listing market and is dedicated to consolidating Hong Kong's position as a leading global listing venue.

Gao Guolei, Chairman of Shanghai Zhanghe Investment, told Caijing, "In the future, the SFC's filing process will only become stricter, not more lenient; it is uncertain how long this round of Hong Kong stock IPOs can last. Therefore, the projects that are currently queued for listing and those planning to queue for filing with the China Securities Regulatory Commission have a certain degree of uncertainty in their prospects."

The Prosperity and Concerns of Hong Kong Stock IPOs

The Hong Kong stock IPO market in 2025 remains active, topping the global fundraising charts with a strong recovery posture.

Data from Wind shows that in the first 11 months of this year, a total of 91 companies completed IPOs in the Hong Kong stock market, raising a total of HKD 25.9889 billion, a significant increase of approximately 228% compared to the same period last year, setting a new height in fundraising scale in recent years and successfully surpassing other major global exchanges to become the annual fundraising champion.

Investor participation enthusiasm has also surged, with a wave of enthusiasm for new share subscriptions sweeping the market. According to Wind data, in the first 11 months of 2025, the average oversubscription multiple for Hong Kong stock IPOs reached as high as 1,675 times, a year-on-year increase of 4.61 times, setting the highest record in nearly five years. At the same time, the profit-making effect continues to be released. As of November 26, after excluding SPACs, transfers, and new shares listed through introduction, the average return rate for new Hong Kong stocks listed in 2025, based on the closing price on the first day, reached 38%, while the proportion of first-day price drops fell to 23.08%, also refreshing the lowest record in nearly five years.

The queue for Hong Kong stock IPOs continues to expand. Data from HKEX shows that as of November 28, the number of main board listing applications being processed reached 496, of which 402 new applications were accepted in 2025, an increase of 2.2 times compared to the same period last year; there are still 331 listing applications being processed, compared to 75 in the same period last year, an increase of 3.4 times As December arrives, the Hong Kong stock market is intensively pushing forward with IPOs. At the beginning of December, a batch of companies including LeMo Technology, Jinyan Gaoling New Materials, Tianyu Semiconductor, Yujian Xiaomian, and Naxinwei (A+H) have listed on the Hong Kong stock market, while companies like JD Industrial, Guoxia Technology, Nanhua Futures, and HashKey have also entered the countdown to listing.

Beneath the surface of prosperity, market concerns have begun to emerge, with some new stocks experiencing unexpected situations in their listing processes.

Haixi New Drug was originally scheduled to list on October 17 but suddenly announced a three-day delay in listing the night before, citing the need for additional time to finalize the allocation results announcement and obtain regulatory approval. Its joint sponsors are Huatai International and CMB International. Ultimately, the stock rose 20% on its first day, but the temporary interruption in the listing process reflects the instability in IPO operations.

More concerning is the quiet rise of the breaking issue. On November 6, Xiaoma Zhixing-W and Wenyuan Zhixing-W both listed on the same day and broke their issue prices. The former opened down 10.79% and ultimately closed down 9.28%, while the latter closed down 9.96% on its first day and continued to decline thereafter. On December 5, Yujian Xiaomian and Tianyu Semiconductor faced heavy losses upon simultaneous listing, closing down 27.84% and 24.97%, respectively. Even with backing from leading companies like Huawei and BYD, Tianyu Semiconductor could not escape this fate. As of December 10, among the 19 new Hong Kong stocks listed since November, 8 broke their issue prices on the first day, with a breaking rate close to half, contrasting sharply with the low breaking rate at the beginning of the year.

"This round of the Hong Kong stock market has lasted over a year, and many quality IPO projects have completed their listings, including quality A-share companies achieving A+H listings and quality entrepreneurial projects choosing Hong Kong for their first IPO. The overall quality of subsequent projects has declined, coupled with the continuous rise of the Hong Kong stock index leading to market sentiment divergence, which may be the main reason for the recent breaking of issue prices in Hong Kong IPOs," said Gao Guolei.

Has the Hong Kong IPO Market Changed?

The differentiated trend in the new stock market is essentially a direct reflection of the uneven quality of IPOs, and the regulatory authorities' joint letter is a concentrated response to this issue.

From the disclosure of the letter, the quality issues of some listing application documents have reached a level that cannot be ignored, not only with vague descriptions of business models and excessive use of promotional language as "superficial flaws," but also with selective presentation of industry data and exaggeration of market positions as "substantive issues." As the "gatekeepers" of the capital market, the failure of sponsoring institutions to perform their duties is even more fatal, including inadequate responses to regulatory inquiries, lack of understanding of basic project facts, and personnel being unreachable or lacking professional competence in key processes such as allocation review and result publication.

"The decline in the quality of Hong Kong stock broker sponsorship is also somewhat inevitable. The sponsoring institutions for Hong Kong IPO projects are mainly the subsidiaries of leading Chinese brokers in Hong Kong, and there are fewer than 10 Chinese brokers with mature and experienced teams for handling Hong Kong IPO sponsorship projects. The current situation is that mature teams are overworked and lack energy, while inexperienced teams are trying to find their way after getting a share of the pie, making the overall decline in the quality of Hong Kong IPO sponsorship inevitable," Gao Guolei mentioned The explosive growth of the Hong Kong stock IPO market is particularly highlighted by the contradiction of insufficient industry service capabilities. During the low period of the Hong Kong stock IPO market during the pandemic, the Hong Kong investment banking industry underwent significant layoffs, leading to a depletion of professional talent reserves, while the sudden recovery of the market in 2025 resulted in a surge in the number of new stocks.

"This year, the number of projects undertaken by sponsoring institutions far exceeds the norm, exposing the issue of staff shortages. Some institutions have even resorted to rough document handling to meet deadlines. Additionally, intensified market competition has led some institutions into the 'scale supremacy' fallacy, taking on business beyond their processing capabilities in a bid to capture market share, neglecting the quality control of projects," a Hong Kong investment banker told Caijing.

The direct consequence of declining quality is the rapid differentiation of the profit-making effect, with an increasing number of cases of stock price breaks prompting the market to reflect on the "quantity-price balance" of Hong Kong stock IPOs.

Some investors have pointed out that "what A-shares experienced in the past few years is now being repeated in Hong Kong stocks. Currently, with nearly 400 companies queued up, if regulatory tightening occurs, it may take five years to fully digest them, and a considerable portion of the queued companies will face difficulties in issuing."

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