The bustling Exchange Square Complex in Hong Kong, home to the city’s stock exchange, is once again becoming a hotspot for Chinese companies eager to go public. This renewed interest is spurred by a surge in global investor confidence, following DeepSeek’s AI breakthrough earlier this year in January.
The excitement in the air is palpable as companies see the IPO route as a lucrative exit strategy. Despite lingering U.S. trade tensions, the level of activity hasn’t been this high in over three years. George Chan of EY highlights the harmonious collaboration among IPO candidates, investors, and regulators as instrumental in fostering a thriving IPO environment in Hong Kong. He notes the comeback of U.S. long-term funds as a sign of increasing investor confidence in China, further backed by strong post-IPO performances.
A testament to this momentum is Mixue, the Chinese bubble tea giant, which went public on March 3 with a highly successful and oversubscribed listing. Meanwhile, Contemporary Amperex Technology (CATL), a major player in the battery industry, filed for what could potentially be Hong Kong’s largest IPO since Kuaishou’s listing in 2021.
DeepSeek’s announcement about its AI development, which boasts capabilities rivaling OpenAI’s ChatGPT and at a lower cost, has noticeably shaken up the tech stock market globally and sparked a rally in China. The Hang Seng Index in Hong Kong has climbed to heights not seen in three years. Alongside this, President Xi Jinping held an uncommon meeting with tech entrepreneurs, signaling Beijing’s renewed support for the private sector amidst past restrictions.
The IPO scene in Hong Kong is witnessing a renaissance, with the first quarter seeing six IPOs exceeding 1 billion HKD each—up from just one last year. In total, Hong Kong raised 17.7 billion HKD from 15 IPOs in Q1, marking the best start since 2021. Yet, there’s still a ways to go to rival the 32 IPOs that amounted to 132.7 billion HKD in the first quarter of 2021. Adjustments to the exchange’s listing rules have facilitated easier listings for mainland companies in Hong Kong.
Companies like CATL, Hengrui Pharmaceuticals, Mabwell, Haitian Flavoring and Food, Fortior Tech, and Sanhua Intelligent Controls, already trading on mainland exchanges, are actively pursuing Hong Kong listings. Tiger Brokers, a key player in this space, underlines how Chinese regulators are advocating for Hong Kong listings to expand financing options and support the growth aspirations of Chinese firms.
Reflecting on past challenges, such as the 2021 fallout from Didi’s U.S. IPO, both Chinese and U.S. regulators have since clarified their positions regarding Chinese companies going public abroad. However, potential hurdles remain; the “America First Investment Policy” hints at possible increased scrutiny on U.S. investments into China, coupled with existing tariff concerns.
Despite unresolved geopolitical tensions, particularly regarding a potential meeting between U.S. and Chinese leaders, the tech and AI boom isn’t enough to single-handedly revitalize China’s economy. George Chan from EY reminds us that while positive indicators are abundant, unforeseen events could easily disrupt the progress. If current trends persist over the next few months, there’s reason to believe the momentum could carry through the rest of the year.
