Hong Kong gains clout as preferred IPO watering hole for Chinese companies

The city is becoming the top destination for new Chinese listings, as China’s A-share market slows the pace of new IPOs and geopolitical factors make New York less attractive

Key Takeaways:

• New York and Hong Kong were evenly split among the 113 overseas listing applications by Chinese companies approved by the Chinese securities regulator this year
• Hong Kong looks set to become the dominant destination for new IPOs by Chinese companies next year, with consumer companies as the biggest group

By Doug Young

China’s IPO boat is increasingly sailing to Hong Kong, which is rapidly becoming the preferred destination over New York and even traditional A-share markets in Shanghai and Shenzhen. That’s the biggest takeaway from a look at IPO activity by Chinese companies in 2024, which saw a strong uptick in the second half of the year.

The trend looks set to continue into 2025, driven by two main factors. On the one hand, China is sharply reducing approvals for new A-share listings to support the domestic markets. That’s driving many companies that previously would have listed in Shanghai or Shenzhen to look to Hong Kong instead. Simultaneously, companies are increasingly avoiding New York over concerns about future China-U.S. tensions.

Those trends are reflected in data from the China Securities Regulatory Commission (CSRC), which must approve all offshore listings and has thus become a gatekeeper for such IPOs.

The 113 overseas listings approved by CSRC this year through Dec. 25 were almost exactly evenly split between Hong Kong and New York, with the former recording 57 approvals to the latter’s 56. But of the total approved for New York, 48 came in the first half of the year, and only eight in the final six months. Hong Kong was more balanced, with 32 approved in the first half and 25 in the second.

The shift towards Hong Kong looks set to accelerate next year, based on CSRC data of pending applications still awaiting approval. Of the 113 pending applications, 81 – or about 72% – were for listings in Hong Kong, compared with just 29 for the U.S. In an interesting footnote to this story, three of the pending applications are for listings in Taiwan, which looks like a first. One other noteworthy application comes from a mining company planning a dual listing in Hong Kong and Kazakhstan, which also looks like a first.

The second half of 2024 was quite strong for Hong Kong in terms of actual new listings as well, hinting at the positive momentum going into 2025. The city hosted 30 IPOs in the first half of the year raising HK$13.4 billion ($1.73 billion), according to KPMG. The number of deals in the second half through Dec. 8 only rose slightly to 33; but the fundraising total more than quadrupled to HK$69.5 billion thanks to several large deals, making Hong Kong the world’s fourth leading IPO destination in the world for the year, KPMG said.

By comparison, new listings in China’s A-share market totaled just 95 for the year, down 73% from 2023, according to Ernst & Young. The amount of funds raised was down by an even sharper 83% to just 61.8 billion yuan ($8.5 billion), representing the lowest total since 2014, as the CSRC sharply reined in new listings as it often does when market sentiment is weak.

Consumer sector dominates

Hong Kong has always been a popular destination for consumer IPOs, and that trend was quite pronounced in 2024 and looks set to grow in 2025. New York was never popular for such Chinese IPOs, with U.S. investors preferring tech and new economy companies. And China has grown increasingly indifferent to such listings, often allowing government-favored sectors like new energy and microchips to skip to the front of the line for the dwindling quota of new IPOs.

Five of six of this year’s largest Hong Kong IPOs came from the consumer sector, led by the largest new offering from home appliance giant Midea (0300.HK; 000333.SZ) that raised HK$35.7 billion in September.

Another noteworthy consumer IPO came from bubble tea maker Chabaidao (2555.HK), which was Hong Kong’s fifth largest listing for the year, raising HK$2.6 billion. This listing was most notable for coming from an overheated sector where at least three other major bubble tea makers are waiting to list. It’s also notable for how miserably Chabaidao’s shares performed, which led the CSRC to take the somewhat unusual step of temporarily halting new listings from this group until earlier this month, when it green-lighted a new IPO by Guming.

That approval means bubble tea listings are likely to resume soon. They should become some of the biggest new listings for next year, including one from sector leader Mixue, continuing the dominance of consumer companies in Hong Kong’s IPO market.

By comparison, the largest New York listings by Chinese companies in the last year all came from tech and new economy companies. Those were led by rival robotaxi operators WeRide (WRD.US) and Pony.ai (PONY.US), which raised $459 million and $413 million, respectively. The only other U.S. listing to raise more than $100 million came from Zeekr (ZK.US), an electric vehicle (EV) arm of car giant Geely, which raised $441 million.

A trend that’s just emerging and likely to grow next year has been for A-share companies to make second listings in Hong Kong. Such listings help companies diversify their investor bases and can also provide a way to raise foreign currency to fund global expansion. Midea kicked off that trend in September with its Hong Kong mega-listing and was followed a month ago by leading logistics company S.F. Holding (6936.HK; 002352.SZ), which raised HK$5.8 billion. The biggest new Hong Kong IPO from this group next year could come from Shenzhen-listed CATL (300750.SZ), the world’s largest EV battery maker, which has reportedly hired advisers to study such a plan.

While Hong Kong, New York, Taiwan and even Kazakhstan are emerging as popular offshore IPO destinations for Chinese companies, one of the biggest new listings next year may take place in Europe instead. Here, we’re talking about the London Stock Exchange, which is reportedly in talks to host a mega-listing by fast-fashion sensation Shein.

Shein originally hoped to list in New York but that plan was thwarted by geopolitical factors. That led it to shift its sights to London, and the latest reports indicate those talks are still in progress for a deal to raise billions of dollars. It’s still possible those talks could collapse, in which case Shein may pack its bags and follow its many smaller Chinese peers to Hong Kong.

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