Why Hong Kong is beating Wall Street as the top spot for IPOs

Investors and businesses’ enthusiasm for Hong Kong’s equity capital markets is roaring back, as Chinese companies flocked to the city for fundraising, sparking a frenzy in the market that had been forsaken in recent years.

Outsized deals and a state-backed push for companies listed in the mainland exchanges to seek a listing in Hong Kong have thrust capital-raising volume to the strongest first half-year since 2021, according to data from data provider Dealogic.

New listing volumes on the Hong Kong Stock Exchange jumped around eight times to $14 billion in the first half of this year, from just $1.8 billion in the same period in 2024, according to Dealogic. That excluded SPAC listings, or special purpose acquisition companies established solely to raise capital through an IPO, with the aim of eventually acquiring or merging with another company.

That puts the city on track to become the world’s largest listing destination this year, surpassing the Nasdaq and the New York Stock Exchange. PwC projected up to 100 IPOs in Hong Kong this year, with total fundraising to exceed $25.5 billion.

The frenzy came after years of lackluster IPO activity in the city amid post-pandemic risk-off sentiment and stuttering economic growth.

In the first half of this year, there were 43 new listings in Hong Kong, with proceeds topping $13.6 billion, surpassing the total sum raised in 2024, data from financial data platform Wind Information showed.

In comparison, there were only 73 listings in 2023, raising just $5.9 billion, according to HKEX data.

The renewed interest is fueled by a confluence of factors, including Beijing’s regulatory tailwinds, the muted pace of A-share listings, ample market liquidity, and delisting fears in U.S. markets, driving mainland companies to raise funds in Hong Kong, according to Steven Sun, head of China equity strategy at HSBC.

“The IPO boom in the Hong Kong market is certainly driven by dual-listing of A-then-H [shares],” said Sun. A-shares refer to mainland-listed shares, while H-shares are those listed in Hong Kong.

“More and more companies use the proceeds to fund their globalization strategy,” Sun said, as the Hong Kong dollar is more fungible than the Chinese yuan in global markets.

A jump in Chinese equity prices last September, triggered by expectations of stronger economic stimulus, helped turn the tide on bearish narratives about China.

At the start of this year, the release of DeepSeek’s low-cost but powerful model further fueled a rally in Chinese tech stocks as investors began to reassess China’s capacity for innovation, spurring a rerating of Chinese equities.

“Market valuations broadly have improved back to historical average levels, which provides a better backdrop for companies looking to fundraise,” said Eugene Hsiao, head of China equity strategy at Macquarie.

As of Wednesday’s close, Hong Kong’s Hang Seng index has gained a stellar 21% so far this year, making it one of the best-performing major markets globally.

Hopes that Chinese authorities will likely unleash additional fiscal spending to shield the economy from any trade-related shock have further underpinned business and investors’ confidence.

In an apparent shift to support the private sector, Chinese President Xi Jinping told the nation’s top business leaders in February that the country needs their help to deliver economic growth.

That shift, coupled with the long-awaited approval by Beijing for mainland firms to list offshore, unleashed a wave of pent-up demand, particularly for high-quality, consumer-facing companies that are less exposed to geopolitical headwinds, said Lorraine Tan, director of equity research at Morningstar.

Chinese securities regulator last year issued a slew of measures aimed at fast-tracking approval for eligible mainland tech companies to list in Hong Kong. Hong Kong regulators also launched a so-called “Technology Enterprises Channel” in May to facilitate IPO approvals for specialist technology and biotech companies, particularly those already listed in the mainland.

“Policy encouraging leading corporate citizens to list in Hong Kong have provided a much-needed shot in the arm” in reviving IPO activity in the city, said Perris Lee, head of equity capital market at Dealogic.

Another driver for Hong Kong’s market rally has been the ample liquidity provided by mainland investors piling into Hong Kong shares, chasing an artificial intelligence frenzy sparked by Deepseek’s breakthroughs and tapping into major capital-raising deals.

The southbound net inflows, tracked through the cross-border link Stock Connect scheme, surged to a record high in the April-June quarter, since the scheme was launched in 2014, according to Wind Information.

In stark contrast, China’s benchmark CSI 300 has barely budged this year, up 0.2% year to date, according to LSEG data.

That has prompted onshore investors to shift money to Hong Kong-listed equities, bolstering the Southbound inflows to account for nearly half of Hong Kong’s daily stock turnover, according to Sun’s estimates.

These factors helped push a flurry of mainland China-traded companies to seek secondary listing in Hong Kong, including battery maker Contemporary Amperex Technology.

Already listed in Shenzhen, the company raised more than $5 billion in a secondary listing in Hong Kong in May, in what is the world’s biggest such offering so far this year.

Among the over 200 active IPO applicants in the pipeline to be listed on HKEX, over 40 are companies already listed on mainland stock exchanges, Wind Information showed.

High-profile companies that sought a primary listing in Hong Kong this year included bubble tea retailers Mixue Group, Guming Holding and ride-hailing platform operator Caocao Inc.

“The appetite to raise offshore funds, especially in HKD, is a reflection of broader plans to expand into overseas markets,” said Hsiao.

Amid cutthroat competition at home and flared-up trade tensions with the U.S., Beijing has called on its leading companies to expand globally and diversify their manufacturing locations.

Additionally, Hong Kong’s market is more “inclusive” of emerging sectors, like AI, renewable energy, digital consumption and biotech, which align with mainland firms’ needs, said Wei Li, head of multi-asset investments for China at BNP Paribas.

The heightened U.S.-China tensions have made Hong Kong a preferred IPO destination for many Chinese firms, over concerns that the Trump administration could order a delisting from U.S. exchanges.

“A secondary listing essentially provides extra insurance for U.S.-listed Chinese companies in an unlikely event that a delisting becomes unnegotiable,” said Lee, suggesting that companies are likely to have engaged financial advisors to hammer out a “plan B,” with or without delisting.