Hong Kong’s IPO Boom in 2025 Hits $35B—Signs of Strain Emerge

Hong Kong’s initial public offering market in 2025 exhibited maximum strength in capital mobilisation, reclaiming the global lead in IPO and secondary‐listing fundraising largely powered by dual (A+H) listings and mainland issuers tapping offshore capital. This achievement, however, masks rising cracks in valuation discipline, investor sentiment, and deal execution.

The sharp contrast between the amount of capital raised and weak first-day share performance suggests that while demand for access remains strong, supply and execution pressures are testing investors’ tolerance. Nearly one-third of IPOs failing to trade above their offer price—and over a third of those underperformers clustered in the last quarter—indicate either overvaluation, market saturation, or both. Pitch valuations have been pushed upward, sometimes beyond what buyers will pay on open market dynamics. Underpricing is avoided by issuers, but the absence of strong aftermarket performance may discourage future IPOs or demand unless corrected.

Sponsor intervention, while stabilising in the short term, carries risks. Deals like CNGR and Jingdong Industrials show banks stepping in to support registry prices, which may temporarily prevent large drops but erode market credibility and shift risks onto sponsors. If these interventions become more frequent or expected, it could lead to distorted pricing of IPOs and increased scrutiny from regulators or investors.

The regulator response has already come: SFC and HKEX have issued warning letters to banks over poor IPO paperwork—issues include insufficient business model descriptions, over-promotion, and copy-paste prospectus sections. Combined with the pipeline swelling to over 300 active IPO applicants, this suggests that enforcement of documentation and disclosure standards will become a more active focal point. Additionally, external macro factors—weak mainland stock performance, hawkish U.S. Fed, and falling liquidity—are weighing on demand. These threaten both pricing and aftermarket support.

Strategic implications:

• Investment banks may need to recalibrate valuations and emphasize realistic pricing to maintain aftermarket strength and investor trust.
• Regulatory risk is rising: poor documentation could lead to delistings, sponsor liability, or reputational damage. Banks must ramp up compliance and due diligence.
• Competition for investor attention is intense: with over 300 firms in the IPO pipeline, sector differentiation and demonstrated growth fundamentals will become critical.
• Market makers and sponsor stability support might become more routine, but raise moral hazard and may attract scrutiny. Establishing clearer norms/benchmarks for when and how to stabilise could become important.

Open questions:

• How will regulators act if underperforming IPOs continue to accumulate—will there be stricter listing standards or even caps on valuations?
• Will institutional investors demand higher discounts or protections (such as greenshoe or stabilization clauses) to counter expected volatility?
• What is the impact of global rate environment and Hong Kong’s dollar peg on funding costs and investor risk premiums?
• Can the current liquidity and policy tailwinds sustain 2026’s IPO volume, or will they falter as macro headwinds strengthen?