Hong Kong’s IPO market has been one of the most active globally in 2025, raising $35 billion in IPOs and secondary listings. This has made Hong Kong Exchanges and Clearing (HKEX) the top listing venue worldwide this year.
However, a deeper look at performance reveals trouble below the surface. As of mid-December, 31 out of 102 IPOs in Hong Kong closed at or below their listing price on the first day. Notably, more than a third of those underperformers (11) occurred in just the last quarter.
This underwhelming finish contrasts starkly with the record fundraising volumes. The signs point not to a collapse, but to a market correction after an overheated streak.
What’s Causing the Cooldown?
Several factors are contributing to the recent underperformance of Hong Kong IPOs:
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Market saturation: More than 300 companies are in the pipeline to list in 2026, creating fierce competition for investor attention.
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Aggressive valuations: Issuers are often unwilling to lower their offering prices, even when advised otherwise by banks.
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Economic headwinds: The Hang Seng Index has fallen 6% since October, mirroring a downturn in mainland China equities.
Investors are showing caution. Turnover on HKEX — a key measure of participation — has declined sharply since summer.
Banks Step In To Stabilize Prices
With multiple high-profile IPOs underperforming, lead banks are increasingly intervening to support falling share prices.
For instance:
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Morgan Stanley purchased 15% of CNGR’s float after its IPO in November to stabilize prices.
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Bank of America likely played a role in Jingdong Industrials’ recovery on its first trading day after a 10% drop.
These interventions aim to maintain market confidence, but also highlight underlying pricing and demand mismatches.
Sector Struggles Add Pressure
The poor performance of some IPOs stems from industry-specific risks. In particular:
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Pony.ai and WeRide, two autonomous driving startups, fell on debut amid concerns over high competition in the Chinese auto sector.
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Guangzhou Xiao Noodles and Tianyu Semiconductor dropped up to 30% after listing, reflecting sector-specific sentiment and weak investor appetite for consumer and tech IPOs.
Analysts suggest that while the market isn’t in freefall, it is undergoing a correction phase.
Macro Trends Are Shifting
The recent hawkish stance by the US Federal Reserve is another negative factor. It points to:
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A stronger US dollar, which can reduce foreign investor flows into Hong Kong
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Lower liquidity, which is essential for supporting active IPO participation
These global signals are likely to impact IPO valuations and investor behavior well into Q1 2026.
What Comes Next?
Despite current headwinds, the pipeline for 2026 remains strong. Over 300 companies are preparing to go public, with many mainland Chinese firms seeking offshore capital for expansion.
The challenge lies in market discipline:
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Issuers must become more realistic in their valuations.
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Regulators are urging investment banks to improve application quality.
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Investors will demand stronger fundamentals and transparency from listing candidates.
While the IPO engine in Hong Kong is still running, expect a more selective and cautious market environment in early 2026.