Go to Hong Kong and seize the new era.

Author: Xie Zhaoqing, Tencent News "Qianwang"

"Busy" has become the norm for investment bankers in Hong Kong during this period.

"There are several days every week spent on business trips to the mainland, dealing with projects and competing for projects," said a sponsor from a leading Chinese investment bank in Hong Kong.

He currently has a total of 8 Hong Kong stock IPO projects, of which 2 have already submitted listing applications, and another 2 will submit their applications soon. The remaining companies have also been working on-site for some time. In addition, he has several projects under negotiation, competing with others for the last sponsorship contracts, including projects for A-shares listing in Hong Kong.

"After returning to Hong Kong and finishing the meeting, I stayed for about a day before starting to travel for work again." Another investment banker stated, "Catching flights or taking high-speed trains has become a daily routine; the market has picked up, and the work pace feels like it's back to pre-pandemic 2018 and 2019."

The IPO data from the Hong Kong Stock Exchange also confirms the market's enthusiasm. Public data shows that as of June 15, there have been 30 IPOs on the Hong Kong Stock Exchange, including the food soy sauce company Haitai Weiye, the industrial company Sanhua Intelligent, and two other medical companies that are currently in the process of going public. If these four companies' fundraising amounts are included, the total fundraising amount of the Hong Kong Stock Exchange will reach HKD 100 billion, which represents an increase of more than five times compared to the same period last year. This also marks the return of the Hong Kong Stock Exchange to the top position in global IPO fundraising amounts after six years.

Bian Jing, head of Agricultural Bank of China International Capital Markets, stated that the current excitement of Hong Kong stock IPOs represents the best window period since the second half of 2021.

He believes that the targets for this wave of companies going public in Hong Kong are all good, including but not limited to industry leaders such as CATL, Hengrui Medicine, and Haitian Flavoring. Many sovereign funds and long-term funds from overseas that he has interacted with have already begun to flow back to Hong Kong and become active. At the same time, the support from regulators in both places for mainland leading companies going public in Hong Kong, including speeding up the filing process for going public, has revitalized the Hong Kong capital market.

Mainland companies accelerate IPOs in Hong Kong: Raised HKD 52.2 billion in a week, with over 200 in the queue.

"Overall, the Hong Kong market has indeed become very active," said Zhu Zhengqin, head of UBS Global Investment Banking in China. In the third week of May this year, her team completed 4 projects, including CATL, raising more than $8 billion (approximately HKD 62.7 billion), among which 3 were projects in the Hong Kong capital market, including the IPO projects of CATL and Heng Rui Medicine, and Bilibili's refinancing in Hong Kong, which raised $690 million.

That week was also a small peak for the Hong Kong IPO market. Public data shows that three mainland companies went public in Hong Kong that week, including Contemporary Amperex Technology Co., Limited, which raised over HKD 41 billion, and Jiangsu Hengrui Medicine Co., Ltd., which raised HKD 9.89 billion. The other company was Mirxes, which raised USD 167 million. The total amount raised in the Hong Kong IPO market that week was USD 6.657 billion, equivalent to HKD 52.252 billion.

This means that the Hong Kong IPO market completed 63% of the total fundraising amount of 82.9 billion Hong Kong dollars for the entire year of 2024 in just 7 days during the third week of May.

Zhu Zhengqin believes that the Hong Kong stock market is indeed much more active now compared to the previous two years. From her observation, after a brief surge in the Hong Kong capital market in September last year, it fell back into silence. However, since January this year, the Hong Kong capital market has been rising steadily following the boom of DeepSeek. Although it was slightly affected by the Sino-U.S. trade disputes for a week or two, the market quickly stabilized again.

The trend of the Hang Seng Index data is similar: the Hang Seng Index rose from 18,800 points on January 13 this year to a nearly two-year high of 24,770 points on March 19, then fell below 20,000 points on April 7, and subsequently climbed again, closing above 24,000 points on June 11.

Several investment bankers in Central, including Bian Jing and Zhu Zhengqing, believe that this wave of market enthusiasm will last for a while. Many mainland companies have also noticed this trend, and some have already begun to accelerate their pace for IPOs in Hong Kong.

Lin Zilong, Head of Global Capital Markets at Aide Financial, stated that from his observations, most project issuers have seen "signs of a complete recovery" in the Hong Kong market and have become more positive in their mindset.

Unlike before, most IPO projects used to require investment bankers to push them forward. "Now, many issuers are more proactive in advancing their plans." He stated that this is because these mainland issuers have seen signs of market recovery and believe that the feasibility of listing in Hong Kong has increased.

According to data from the Hong Kong Stock Exchange, 37 and 42 companies submitted listing applications in April and May, respectively, while 29, 11, and 13 companies submitted listing applications in January, February, and March, respectively. This data also indicates that the number of companies going public in Hong Kong is indeed increasing. Less than two weeks have passed since June, and as of June 11, 14 companies have already submitted listing applications.

The Hong Kong Stock Exchange's official website shows that as of June 13, 211 companies are waiting to go public, while 30 have already been listed.

Generally speaking, the Hong Kong Stock Exchange lists about 100 IPOs each year, even reaching 218 listings during the market peak in 2018. This means that this year, the Hong Kong stock IPOs may experience a "traffic jam" in listings—depending on the pace at which the relevant regulatory authorities approve them.

Adults do not make choices: seize the policy dividend period, both A and H are necessary.

"Now, for issuers to list in Hong Kong, it is no longer a question of choice." Zhu Zhengqin stated that a few years ago, mainland enterprises would consider whether to list domestically, in the United States, or in Hong Kong as a matter of choice, but now they are seriously considering the opportunities in Hong Kong.

This is because the Hong Kong market has become easier for issuers, including the convenience of subsequent refinancing and the ease of reducing equity incentives for company executives.

Bian Jing stated that one important reason for the issuer's choice of the Hong Kong market is that the current excitement in the Hong Kong IPO market is the best window period since the second half of 2021, which is also a window period for policy dividends.

Last year, the China Securities Regulatory Commission launched "five cooperation measures with Hong Kong," which include clearly "supporting leading enterprises from the mainland to list in Hong Kong," as well as promoting A-share companies to list in Hong Kong.

Lin Zilong from Aide Financial Group has deeper feelings about this. He and his team began to prepare for mainland companies' listing projects in Hong Kong as early as two years ago, including A-shares listing in Hong Kong. Previously, in the atmosphere of market uncertainties, when he and his team discussed the listing plans in Hong Kong with these mainland A-share companies, the latter rarely provided positive feedback.

An investment banker engaged in IPO projects in Hong Kong stated that when discussing the plan for mainland A-share companies to go public in Hong Kong last year, they were even considered a "fraud" by some, because compared to A-shares, the Hong Kong stock market has long been criticized for issues related to liquidity and valuation.

At the same time, for the issuers, going public in Hong Kong requires consideration of the anticipated listing timeline and costs. Previously, the timeline for A-share listings in Hong Kong was unclear, which was a headache for both issuers and investment banks. Generally speaking, if the process goes smoothly, the timeline for a Hong Kong IPO, starting from the submission of the listing application, usually takes 6 to 9 months, or up to 12 months.

All of this began to change after the "926 policy". (Note: On September 26, the Politburo of the CPC Central Committee held a meeting, emphasizing efforts to boost the capital market.) Both Hong Kong stocks and A-shares experienced a surge at that time. Most familiar to the market is that on September 17, the A-share company Midea Group successfully listed in Hong Kong, raising over 30 billion HKD, and its performance in the subsequent market was also good, with a two-day increase reaching 17% at one point.

Lin Zilong stated that, based on his and his team's interactions with mainland A-share issuers, they are more sensitive to policies compared to issuers from other regions. They observed that after the listing of Midea Group, the signals supporting the new policy for A-shares to go public in Hong Kong became very certain, believing that the feasibility of going public in Hong Kong has increased, with more discussions needed only on the valuation issues.

Subsequently, the acceleration of the listing approval process for CATL in Hong Kong and other factors have made these mainland issuers more aware of the policy direction.

Multiple investment banking professionals in Central believe that for a long time to come, the vibrancy of the Hong Kong stock market may still focus on the projects of A-shares listing in Hong Kong, as these projects dominate the fundraising market in Hong Kong.

This is not difficult to understand. Most of the A-share companies going public in Hong Kong this time have good targets, with a market value mostly exceeding 1 billion USD, and even close to 5 billion USD, etc. As of May 20, the data of A-share companies that have publicly announced their intention to go public in Hong Kong is shown in the figure below (image from UBS).

"We must seize this policy window" Lin Zilong believes this is the mindset of many mainland issuers he has encountered. He thinks that the mentality of mainland issuers has begun to change significantly and is now more positive towards going public. These issuers believe that they can take advantage of the current boom period to list in Hong Kong for fundraising, pushing forward first, and then repurchasing or expanding overseas business after raising funds.

Bian Jing stated that the current wave of mainland companies heading to Hong Kong is also influenced by the current "going global" trend among Chinese enterprises. From what he understands, many mainland companies that are going public in Hong Kong currently have a strong need for going global or global industrial layout.

A person in charge of a small to medium-sized brokerage firm stated that, in his observation, the approval process for A-share companies listing in Hong Kong is indeed faster than that for new stocks going to Hong Kong or the U.S. He also mentioned that this may be because the A-share companies going to Hong Kong are relatively all domestic industry leaders and have already been listed on the A-share market, making the relevant materials and reviews possibly easier.

Of course, the liquidity of Hong Kong stocks is improving, which is a point of concern for issuers going public in Hong Kong. Public data shows that in the first five months of 2025, the average daily trading volume on the Hong Kong Stock Exchange was HKD 242.3 billion, an increase of 120% compared to HKD 110.2 billion during the same period last year.

Compared to the previous A-share companies listing in Hong Kong, aside from liquidity, the valuation of Hong Kong stocks has also begun to change. The Hang Seng Index has soared above 24,000 points, and the price gap between A-shares and Hong Kong stocks is gradually narrowing, even leading to the phenomenon of "Hong Kong stocks trading at a premium over A-shares."

Taking CATL as an example, it was listed at HKD 263 per share on May 20, which is about a 7% discount compared to A-shares. However, it opened with a gain of over 12% on that day, reaching a peak increase of more than 18%, and closed at HKD 306.20 per share, which is a slight premium compared to the A-shares of that day (CNY 263.00 per share). This phenomenon is relatively rare among A+H shares. In fact, the subsequent performance of CATL has consistently shown a slight premium compared to A-shares.

Such phenomena are not common among the more than 100 companies that are listed simultaneously on A+H. Previously, A-share companies listing in Hong Kong had H-share prices generally trading at a long-term discount compared to A-shares. Public data shows that only a few companies, such as BYD and China Merchants Bank, have experienced premiums.

Some Central Hong Kong fund managers believe that, in addition to the scarcity of the underlying assets, the issuance structure of CATL in the Hong Kong stock market results in a relatively small base of circulating shares, which also affects the upward movement of the stock price. (Note: The circulating shares of CATL in the A-shares and Hong Kong stocks are 3.9 billion shares and 156 million shares, respectively.)

Wang Shuguang, a member of the Management Committee of China International Capital Corporation, stated that good companies in China, after being listed in Hong Kong, have a certain premium on their A-share trading prices. This reflects the recognition these companies have received from international funds, which may subsequently feedback to the A-share market, allowing more investors to pay attention to these undervalued good companies in the A-share market.

The head of a medium-sized brokerage firm believes that before the domestic A-share market is opened up, there are actually no more options for listing Chinese assets in the foreseeable future, aside from the Hong Kong market. This is due to geopolitical factors, which have made issuers more cautious about listing in the US or Europe.

If multiple-choice questions are not done well, one may miss the best listing opportunity, and the leading cross-border e-commerce company Shein is the best example.

Shein once planned to go public in the US, the UK, and even Singapore, but recently it has decided to submit its listing application in Hong Kong. Over the years of making choices, Shein's valuation has been halved, dropping from a peak of $100 billion to reportedly less than $30 billion now.

CATL has made a "bad" start: investment banks are getting involved even if they don't make money.

Regarding how long the trend of A-shares listing in Hong Kong will last, Wang Shuguang also stated that A-share companies listing in Hong Kong will be a trend that may continue for a long time.

Public data shows that this year nearly 50 A-share companies have clearly announced their plans to list in Hong Kong. As of June 13, 5 A-share companies have already listed in Hong Kong, including CATL, Heng Rui Medicine, and Jihong Co., Ltd. Additionally, there are 2 companies, Haitian Flavoring and Sanhua Intelligent, that are currently in the process of going public.

Zhu Zhengqin believes that the pool of A-share listed companies is large enough, and even the A-share companies that have confirmed their listing in Hong Kong can continue for a long time.

She also stated that the current wave of Hong Kong stock IPOs is not entirely dominated by A-share companies going south to IPO. She cited the examples of Mao Geping, which was listed at the end of last year, as well as Mijia Ice City and Bluecore, which were listed at the beginning of this year. The market response has also been enthusiastic, but these are not A-share companies going to Hong Kong; they are new stock IPO projects.

Bian Jing also believes that this wave of enthusiasm may last for some time. Companies applying for listings in Hong Kong now have sufficient reserves. For example, in the case of Agricultural Bank International, he and his team have sponsored projects this year, with 9 projects already submitted applications, more than 10 projects about to be submitted, and another more than 10 projects in talks.

At the same time, Bian Jing also believes that many foreign long-term funds and sovereign funds have gradually returned to Hong Kong.

According to his observations, in the past few months, many foreign sovereign funds have appeared on the cornerstone list of IPO subscriptions for the IPOs that have been listed. In fact, many other foreign sovereign funds have also been gradually placing orders from the institutional subscription part of the IPOs - this part does not need to be disclosed, and the outside world knows little about it. "These IPOs can provide considerable returns for the funds, so they will continue to stay in the Hong Kong market."

Tencent News "Observation" has learned that this time the repatriated sovereign funds include, but are not limited to, Temasek, GIC and other Singapore sovereign funds, Canadian sovereign funds, Malaysian sovereign funds, as well as sovereign funds from Middle Eastern countries such as Abu Dhabi, Kuwait, and Saudi Arabia. They have all participated in Hong Kong IPO orders over the past few months. They all want to seize the opportunity and do not want to miss this round of "China fever."

Most of the IPOs participated in by these funds are profitable. According to data from Ernst & Young, about 70% of the Hong Kong stock IPO projects in the past six months were profitable on the first day.

These overseas large funds are quite concerned about the good companies in the A-shares market that are undervalued and plan to be listed in Hong Kong. For a long time to come, over 90% of the A-share companies going public in Hong Kong during this wave will have a market value of over $1 billion. Looking at the companies that have submitted their applications now, most are led by top investment banks in Hong Kong.

Lin Zilong believes that the current wave of A-share companies being listed in Hong Kong with a valuation of $1 billion may continue until next year, after which more A-share companies with valuations below $1 billion may go public in Hong Kong – this is also where his company, Aide Financial, and most of the central brokerage firms are focusing their efforts. Currently, most of the A+H projects in his and his team's hands are concentrated on companies with valuations within $1 billion.

"It looks very lively, but this is actually the hustle and bustle of large investment banks, which has little to do with small and medium-sized investment banks." sighed the head of a small to medium-sized investment bank. Most of the IPO projects in his hands have not received approval, and small investment banks simply cannot get involved in large A-share IPO projects going to Hong Kong. In his view, these large projects have siphoned off most of the market funds, making it still very difficult for small projects to be issued.

But in reality, the days of major investment banks are not as good as the outside world imagines. Many investment bankers have revealed that while there do seem to be more projects now, the profit increase from IPO projects is not as expected, and some are even declining, including some major investment banks that may lose money on IPO projects.

"Currently, the costs for A-share companies listing in Hong Kong are significantly reduced." Multiple investment bankers have revealed that even with such low costs, investment banks are still fiercely competing for IPO projects because IPOs serve as a "traffic driver" for them. By establishing connections through IPO projects, these issuers may later engage in refinancing in Hong Kong or management's family office services, which are the businesses that the group companies of investment banks value more. If they do not actively participate in IPO projects, investment banks may miss out on subsequent fundraising opportunities.

The most exaggerated is CATL, which just went public, with a fixed underwriting fee of 0.2%. Many investment bankers believe that CATL's listing has actually set a "bad" precedent in the Hong Kong stock market, causing most A-share companies going public in Hong Kong to use this as a reference for their fees.

Currently, most A-share IPOs listed in Hong Kong have a fixed underwriting fee of less than 1%, and even some foreign investment banks have offered a fixed underwriting fee of as low as 0.4%—which is significantly lower than the conventional fixed underwriting fee for IPOs, which ranges from 3% to 5%. Among the Chinese investment banks in Hong Kong, there is a tendency to bid with lower fixed underwriting fees to secure projects.

For investment banks, the difficulty and workload of A-shares listing in Hong Kong have not decreased, but the underwriting fees have significantly dropped. Many investment bankers participating in IPO projects have complained that A+H projects are actually more exhausting than before, yet their income has decreased. Among them, many Chinese investment banks have seen a significant decline in both income and bonuses over the past few years, but the investment bankers are also hesitant to rashly switch to foreign banks, which offer much higher income than Chinese ones.

This is because foreign banks often significantly cut jobs when projects decrease, often facing uncertainty about the future—while Chinese investment banks, especially those affiliated with banks, tend to be relatively more stable.

Bian Jing stated that in the past few months, as the market has improved and more projects have emerged, investment banks have made corresponding adjustments in their fees due to a shortage of manpower. According to him, the quotes for some IPO projects, including sponsorship fees, have increased compared to before.

Before this, due to a sluggish market and few IPO projects, some Chinese investment banks had once rolled the sponsor's signing fee up to about 3 million HKD. The most exaggerated case was CATL, whose sponsorship fee, including foreign investment banks, was uniformly set at 300,000 USD, equivalent to 2.35 million HKD. The sponsors for CATL included several investment banks such as JPMorgan, Bank of America, and CITIC Securities International.

At the same time, according to Bian Jing, at least five Chinese-funded investment banks in Hong Kong have launched new recruitment plans due to the increase in IPO projects. "Once the market improves, everything is slowly climbing in a positive direction, whether it's income or recruitment, etc."

In the coming long period of time, the days of investment banks in Hong Kong will be much better.