Hong Kong's stock exchange has emerged as the top global market for IPOs, surpassing both the New York Stock Exchange and Nasdaq in funds raised last year, as reported by KPMG. However, the performance of these IPOs has been disappointing, with approximately half of the 179 listings since January 2025 trading lower over the past three months.
This contrasts with a slight decline in the Hang Seng index and a more than 10% increase in the FTSE Renaissance Global IPO Index during the same timeframe. The situation is particularly dire for stocks included in the Stock Connect program, which allows mainland Chinese investors to buy Hong Kong-listed shares.
Many of these stocks saw significant price increases post-IPO, only to experience sharp declines afterward, with AI startup Deepexi plummeting 51% as of June 3. Analysts, including Leonid Mironov from Gavekal and Ding Wenjie from China Asset Management Co., have noted that capital often shifts back to cheaper mainland A shares after IPOs join the Connect program.
Goldman Sachs has forecasted that Hong Kong will raise about $60 billion in IPOs this year, nearly doubling the previous year's total, but has downgraded Hong Kong H shares in favor of A shares for better exposure to AI hardware. The pressures of low fees, weaker fundraising, and increased competition are contributing to a focus on short-term performance in China's financial sector.
The upcoming listings of Knowledge Atlas Technology and MiniMax, both AI companies that debuted in Hong Kong in January, will be critical tests for the market's resilience