Structural Shift Behind Hong Kong’s IPO Comeback – Report Decoded

After years in the doldrums, Hong Kong's IPO market is roaring back — and it's more than just a sentiment-driven rally. According to a July 16 report from Goldman Sachs Global Investment Research, the resurgence reflects a policy-fueled structural shift in Asia’s capital landscape, with implications that extend far beyond the city’s skyline.

Momentum by the Numbers

As of mid-July 2025, 51 companies have gone public on HKEX, raising HK$124 billion (~US$15.9 billion). This already surpasses the full-year total for 2024 (HK$88 billion), marking the strongest capital-raising pace in recent memory. With over 200 IPO applications now in the pipeline, momentum is clearly building.

Goldman Sachs calls this a sharp reversal from the post-2021 downturn. Between 2022 and 2024, annual IPO proceeds in Hong Kong averaged just US$10 billion — roughly one-third of the activity seen in the five years prior. The current surge, in their view, represents a fundamental reawakening of the city's capital markets.

Why Now?

Goldman Sachs identifies four structural drivers behind the resurgence:

1. Policy Support from Both Mainland and Hong Kong

In April 2024, China’s CSRC introduced its “Five Measures,” encouraging leading mainland enterprises to list in Hong Kong.
HKEX, meanwhile, streamlined its listing process and opened new channels for biotech and tech firms, including Weighted Voting Rights (WVR) structures — all part of a coordinated push to attract global capital.

2. Bottlenecks in A-Share Listings

Due to the CSRC’s “Nine Measures” raising the bar for domestic IPOs, A-share listings have slowed dramatically — just 54 so far this year, compared to 300–500 annually during 2021–2023. Hong Kong has become the natural alternative.

3. Improved Market Sentiment

With the Hang Seng Index up 20% and HSTECH up 17% YTD, global investors are paying attention again. Lower interest rates (HIBOR), AI optimism, and easing U.S.-China tensions are driving capital back into China-linked equities.

4. Rising Demand for Dual Listings

Chinese ADRs and A-shares are increasingly seeking dual listings in Hong Kong, both to mitigate U.S. delisting risks and to access Southbound capital from mainland investors. Notably, Goldman highlights that 80% of U.S. institutional investors in Chinese ADRs already hold HK-listed equivalents, enabling a smoother shift in liquidity.

Who’s Buying These IPOs?

Goldman notes a broad resurgence in both institutional and retail participation:

42% of capital raised so far in 2025 came from cornerstone investors, with two-thirds from international funds.
Global long-term allocators, including sovereign wealth and pension funds, have returned after a multi-year pullback.
Retail demand has surged as well, even though the average demand-to-offer ratio has fallen to 9% (down from the five-year average of 25%). Goldman interprets this as a sign of growing public risk appetite rather than waning interest.

Post-IPO Performance: Beating Expectations

According to the report, IPOs in 2024–2025 are outperforming historical trends by a wide margin:

Goldman’s data shows that companies with 30–50% cornerstone ownership and high revenue growth tend to deliver the best post-IPO returns. Interestingly, company size was not a significant factor in performance differentials.

Southbound Inclusion & Index Boost

A key structural advantage of listing in Hong Kong is eligibility for Southbound trading and index inclusion:

Primary listings — unlike secondary ones — qualify for Southbound access, opening the door to mainland investors.
US$134 billion in passive AUM tracks MSCI China indices, and US$28 billion follows the Hang Seng Index.
Goldman estimates that once included, Southbound ownership of newly dual-listed stocks typically rises 7–16% within a year, often acting as a tailwind for share prices.

Investment Implications — Goldman’s Take

Goldman Sachs outlines several beneficiaries of this IPO revival:

HKEX and China brokers with offshore business exposure
Consumer, Tech, and Healthcare sectors — IPOs in these areas have delivered the strongest post-listing returns
High-quality A-share names planning HK listings, especially those with strong foreign ownership and EPS growth

In the report, Goldman screens 20 A-share companies with announced plans to list in Hong Kong. These firms have >10% EPS CAGR (2024–26) and PEG ratios <2x — suggesting both growth and valuation support. Flagged names include Midea, CATL, and Hengrui Pharma.

Final Word

This is not just a speculative rally — it's a structural realignment of Asia’s equity capital markets. As Goldman Sachs puts it, Hong Kong's IPO resurgence is being driven by policy coordination, regulatory arbitrage, and cross-border capital flow optimization.

For investors, this could be a window of opportunity — not just to capture short-term post-IPO gains, but to reengage with China through a more transparent and globally accessible platform.