Trillion-dollar giant plans to list in Hong Kong, is the IPO market about to undergo a major change?

The Hong Kong IPO market in 2024 was exceptionally lively, setting the stage for many trends in the coming year. According to Deloitte's data, there were 69 new listings on the Hong Kong stock market this year, raising a total of approximately HKD 87.6 billion. Although the number of new listings only saw a slight decrease of 1%, the total fundraising surged by 89%, indicating an extremely strong market.

From an industry perspective, the tech flavor is becoming increasingly prominent, with many companies in the information technology, media, and telecommunications sectors among the top 10 IPOs. Moreover, 70% of the new IPO applications came from the three hottest industries: healthcare and life sciences, information technology, and consumer goods.

CSRC Encourages "A-to-H" Listings, HKEX Lowers Barriers

In April this year, the China Securities Regulatory Commission (CSRC) introduced five measures to enhance cooperation with Hong Kong, strongly encouraging leading domestic companies to list in Hong Kong. Many A-share companies were tempted and began considering dual "A+H" listings.

Meanwhile, in December, the Hong Kong Exchanges and Clearing Limited (HKEX) published a consultation paper titled "Proposals to Optimize the Pricing and Public Offering Mechanisms for Initial Public Offerings," aiming to enhance the competitiveness of Hong Kong's securities market by optimizing public offering rules, IPO pricing, and issuance mechanisms.

Among the proposals, it suggested lowering the minimum H-share threshold for A+H issuers listing in Hong Kong. This includes requiring that the number of H-shares offered must account for at least 10% of the total issued shares (excluding treasury shares) of the same class by the A+H issuer, and that the expected market capitalization should be at least HKD 3 billion, with these shares held by the public.

This means more mainland companies will be able to more easily access Hong Kong's capital market. Previously, some companies might have hesitated due to high barriers, but with the policy relaxation, even smaller but promising companies now have opportunities. This undoubtedly injects new vitality into Hong Kong's IPO market, making competition more diverse and offering investors more choices.

Investor enthusiasm was also blazing, with 95% of Hong Kong IPOs being oversubscribed, 4 percentage points higher than in 2023. The average oversubscription multiple reached 295, a 24-fold increase year-on-year.

Bright Prospects for Hong Kong IPOs in 2025

From a market size perspective, the outlook is quite optimistic. Deloitte expects around 80 new listings, with total fundraising estimated between HKD 130 billion and HKD 150 billion. Some intermediaries even boldly predict that there could be five new listings raising HKD 5 billion each, setting the market abuzz.

In terms of industries, technology, healthcare, pharmaceuticals, and consumer goods remain the "pillars" of the IPO market. With the global push for technological innovation and increasing demands for health and quality of life, companies in these sectors have vast growth potential and strong financing needs.

Trillion-Dollar Giant Plans Hong Kong Listing

Recently, the trillion-dollar new energy giant CATL was rumored to be planning a Hong Kong listing, aiming to raise at least USD 5 billion, potentially making it the largest IPO in Hong Kong since early 2021.

CATL listed on the A-share ChiNext board in June 2018 and currently has a total market capitalization of RMB 1.2 trillion. Since the beginning of this year, its stock price has surged over 60%.

Last year, there were already rumors about CATL's Hong Kong listing plans, with lead underwriters possibly including China Securities, CICC, Goldman Sachs, and UBS. Additionally, in December 2023, CATL signed a memorandum of cooperation with Hong Kong Science Park to establish an international R&D center in the Hong Kong Science Park, with the Hong Kong Research Institute set to open in October 2024. These steps clearly indicate preparations for a Hong Kong listing.

Similarly, according to Bloomberg, the RMB 200 billion "Huawei-affiliated" new energy automaker Seres is considering a secondary listing in Hong Kong in 2025, potentially raising over USD 1 billion.

Seres has also performed strongly in the A-share market in 2024, with its market capitalization continuously rising, up 80% cumulatively to RMB 206.7 billion. Its Aito M7 has delivered over 180,000 units, and the Aito M9 has received over 180,000 pre-orders in 11 months since launch. Market recognition of its products gives it more confidence for a Hong Kong secondary listing, attracting more investor attention.

These giant listings in Hong Kong will significantly aid their internationalization strategies, helping them expand globally, replenish cash flow, and provide ample "ammunition" for overseas expansion.

Opportunity or Challenge?

However, the 2025 Hong Kong IPO market is not without risks and challenges.

Market volatility is a major issue. Although current expectations are positive, the unpredictable global economic landscape and geopolitical disruptions could lead to roller-coaster market swings, making IPO pricing uncertain.

Competition is also intense. With more companies vying for a slice of the Hong Kong IPO pie, standing out to attract investor funds becomes crucial.

Regulatory changes are another factor. Capital market policies can shift unexpectedly, and companies must stay compliant to avoid obstacles in the listing process.

2025 Hong Kong IPOs: A Capital Feast of Opportunities and Challenges

Investors must keep their eyes open and avoid blind follow-the-crowd behavior. Companies, on the other hand, should prepare thoroughly to seize market opportunities.