The landscape of capital markets is undergoing significant transformation, particularly for Chinese companies seeking external funding. Since the economic reforms initiated in the 1980s, enterprises from the Chinese Mainland have shown a keen interest in accessing international capital pools. This desire has intensified as firms navigate the complexities of offshore listings in response to evolving market dynamics.
This article examines the factors driving the recent resurgence of Initial Public Offerings (IPOs) on the Hong Kong Exchanges and Clearing Limited (HKEX). The discussion will address the changing regulatory environment, the impact of US-China relations, and the structural reforms within Hong Kong’s financial system.
The shift towards Hong Kong for capital raising
Over 300 Mainland Chinese companies have successfully listed abroad, raising substantial capital. Notably, during the pandemic, HKEX emerged as a critical player, amassing approximately $50 billion through IPOs, primarily from tech giants like JD and NetEase, which opted for secondary listings.
Traditionally, US exchanges such as the NYSE and NASDAQ have dominated, commanding over $50 trillion in combined market capitalization. These exchanges have historically attracted Chinese firms due to their visibility and liquidity. However, alternatives like HKEX are gaining traction, particularly as regulations tighten in the US.
Regulatory changes and their implications
The past decade has witnessed a significant shift in the regulatory landscape governing foreign listings. A pivotal moment occurred with the enactment of the Holding Foreign Companies Accountable Act (HFCAA) in the US, which imposes stringent auditing compliance on foreign firms. As a result, the number of new listings from Chinese companies in US markets has markedly declined, indicating a clear pivot towards Hong Kong.
Additionally, Chinese national security laws impose restrictions on sharing certain financial data with foreign entities, creating conflicts with US regulatory requirements. The Data Security Law, enacted in 2025, further complicates the landscape for Chinese firms seeking US capital due to its restrictions on cross-border data flows.
HKEX as a new focal point
In this context, HKEX is emerging as a vital hub for Chinese companies. Its reforms, such as the introduction of weighted voting rights for innovative firms, position it as a viable alternative for companies that have relied on US markets for dual-class share structures. This newfound flexibility enables firms to maintain control while raising essential capital.
The Stock Connect program, initiated in 2014, has strengthened the connection between HKEX and the Chinese Mainland, allowing local investors to participate in Hong Kong-listed stocks. This initiative enhances liquidity and valuation potential, making HKEX an attractive destination for companies seeking international expansion.
Potential risks and market dynamics
Despite positive trends, the concentration of Mainland companies on HKEX—approximately 80% of its market capitalization—presents significant risks. Such dependency exposes investors to fluctuations in the Chinese economy and changes in regulatory landscapes. Moreover, many recent IPOs have been priced aggressively, raising concerns about their long-term performance.
The Hang Seng index has seen remarkable growth, yet analysts caution that this surge may be driven more by short-term liquidity than by sustainable economic fundamentals. For investors, distinguishing between cyclical recoveries and structural shifts will be crucial in navigating this evolving market.
Looking ahead: The future of listings in Hong Kong
This article examines the factors driving the recent resurgence of Initial Public Offerings (IPOs) on the Hong Kong Exchanges and Clearing Limited (HKEX). The discussion will address the changing regulatory environment, the impact of US-China relations, and the structural reforms within Hong Kong’s financial system.0
This article examines the factors driving the recent resurgence of Initial Public Offerings (IPOs) on the Hong Kong Exchanges and Clearing Limited (HKEX). The discussion will address the changing regulatory environment, the impact of US-China relations, and the structural reforms within Hong Kong’s financial system.1