How is CATL's record-breaking IPO revitalising Hong Kong's capital markets?

Hong Kong's role in global capital markets

The Hong Kong stock exchange remains one of the world's financial powerhouses, ranking as the sixth largest globally by market capitalisation as of April 2025. It continues to serve as a crucial conduit for Chinese companies seeking international capital.

Mainland businesses account for nearly 90% of all listings in Hong Kong. This strategic position has established Hong Kong as a vital financial bridge between Chinese enterprises and global investors.

The exchange offers companies access to international capital while providing investors exposure to China's growing economy through a regulated market. Despite recent fluctuations, Hong Kong remains a premier listing destination, with many international investors preferring it over mainland exchanges due to greater transparency and familiar regulatory standards.

Recent IPO activity and market trends

Earlier this week, electric vehicle battery manufacturer Contemporary Amperex Technology Co Ltd (CATL) raised HK$35.7 billion through its Hong Kong listing, making it the largest initial public offering globally this year. The listing saw extraordinary demand from investors. Hong Kong investors oversubscribed by more than 150 times and international investors by more than 15 times during the book-building phase.

While the total of HK$60 billion raised through all new Hong Kong main board listings so far this year represents only 21% of the amount raised during January-May 2020, clear recovery signs are emerging.

Market sentiment and macroeconomic factors significantly influence investor appetite, directly impacting both capital raise size and listing prices. Figure 1 demonstrates the strong correlation between IPO fundraising volumes and overall stock market performance.

Additionally, regulatory frameworks play a crucial role in supporting the listing approval process. An accommodative regulatory environment encourages more companies to pursue public listings and helps ensure smoother transactions.

Figure 1: Initial public offering activities on Hong Kong's main board

Source: Hong Kong Exchanges and Clearing Limited, as of 20 May 2025

Regulatory impact on Hong Kong listings

In 2020, Chinese regulators shocked markets by halting Ant Group's HK$289 billion IPO just before listing, citing concerns about systemic financial risks from rapidly expanding fintech operations. This unprecedented move signalled the beginning of broader reforms.

Shortly afterward, the central government announced sweeping regulatory changes, including anti-trust investigations and property speculation crackdowns. These uncertainties, combined with disappointing stock market performance, reduced new listings between 2021 and 2023.

The recent uptick in IPO activity correlates with the Chinese government's stimulus package in 2024, which has catalysed a strong market rally. This improvement has created a more favourable environment for companies considering public listings.

US-China relations have also influenced listing decisions, with some Chinese companies currently listed in the US seeking Hong Kong listings to mitigate risks. These companies aim to protect themselves against potential US delisting amid escalating geopolitical tensions.

Performance of newly listed stocks

Contrary to common belief that newly listed stocks generally perform well short-term, our analysis of 464 main board listings since 2020 (excluding transfers from the Growth Enterprise Market) reveals a more nuanced picture. On average, 61% of new listings trade higher than their IPO price on the first day. This percentage improves during years of stronger broader market performance, reaching 67% in 2020 and 64% in 2024.

However, when extending the holding period to one week after listing, the proportion of profitable new listings drops to 53%, and further declines to 49% after one month.

This trend reinforces the need for investors to look beyond initial excitement and evaluate the long-term potential of new listings. Investors should conduct thorough research before participating in IPOs. Understanding a company's fundamentals (including its business model, strategic growth plans, and valuations) alongside the macroeconomic environment remains essential when trading newly listed stocks.

Figure 2: Breakdown of new listings by profitability on the first day of trading

Figure 3: Breakdown of new listings by profitability after the first week of trading

Figure 4: Breakdown of new listings by profitability after the first month of trading

Upcoming Hong Kong IPO pipeline

Several companies have confirmed upcoming listings on the Hong Kong exchange:

• Hengrui Pharmaeuticals: aiming to raise as much as HK$9.9 billion will be listed on 23 May
• Mirxes: aiming to raise as much as HK$1.1 billion will be listed on 23 May
• PegBio: aiming to raise as much as HK$300 million will be listed on 27 May
• Jihong Company: aiming to raise as much as HK$725 million will be listed on 27 May

Several companies are reported to be considering listing in Hong Kong, including the international unit of Ant Group:

• Ant International: the overseas arm of Ant Group. Ant Group's IPO was banned by Chinese regulators in 2020 on anti-trust concerns
• Pony AI: the Chinese autonomous driving company may have confidentially filed for listing
• Hesai: the world's largest manufacturer of lidar sensors used in driver assistance systems may have confidentially filed for listing
• Beijing Roborock Technology: Xiaomi-backed robot vacuum company to raise as much as US$500 million
• Capital A: the parent company of AirAsia may raise at least US$200 million