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Opinion | Quality should come before quantity for Hong Kong’s IPOs

  • An influx of listings with weak financial underpinnings would drive away the investors who sought refuge in the city’s stable markets

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The Hong Kong skyline on a cloudy day. Photo: K.Y. Cheng
Hong Kong has long stood as a beacon of financial prowess, with its stock exchange often leading the world in initial public offerings (IPOs). In 2009, Hong Kong ranked as the world’s largest IPO market for the first time. A decade later, in 2019, it retained this position, buoyed by Alibaba’s significant secondary listing – a testament to the city’s financial vibrancy and its role as a gateway to global capital.
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Yet, as with all golden ages, Hong Kong’s lustre is dimming. The once robust IPO market now echoes with the whispers of decline. IPO proceeds have plummeted, and the parade of high-profile listings has slowed to a trickle, mirroring Hong Kong’s broader struggle to retain its status as a global financial hub.

The numbers tell a sobering tale: in 2023, IPO proceeds fell to their lowest level in two decades, with the main board and growth enterprise market together raising only HK$46.29 billion (US$5.94 billion) by the end of the year – a dramatic 55.8 per cent decline from the previous year and less than half of Nasdaq’s US$13 billion. More concerning is that Hong Kong’s IPO market was outpaced by its mainland counterparts.

This year has offered little relief. Despite 41 companies going public and raising more than HK$19 billion (US$2.4 billion), the underlying trends are troubling. More than half of these newly listed companies opened lower than their listing price on their debut, with 49 per cent experiencing declines in stock price and 44 per cent accumulating losses of more than 10 per cent. For example, Chinese bubble tea maker Sichuan Baicha Baidao Industrial, despite being the biggest debut of 2024, saw its stock plunge by 27 per cent on its first day and has gone further down since listing.
Similarly, Black Sesame International Holding, a company specialising in autonomous driving technologies, further underscores the pitfalls of Hong Kong’s current IPO landscape. Despite raising significant capital, its stock swiftly plummeted by over 30 per cent, revealing a weak financial foundation marked by growing substantial net losses totalling nearly 10 billion yuan (US$1.4 billion) in the last three years.
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This rapid decline and the company’s consistent financial underperformance reveal a worrying trend: companies heavily reliant on future potential rather than present financial stability often contribute little to market value, especially in an environment as volatile as today’s. The rush to list such companies only adds to the instability, eroding investor confidence.

Bonnie Chan, chief executive officer of Hong Kong Exchanges & Clearing Ltd, during the listing ceremony of Black Sesame International Holding in Hong Kong on August 8. Photo: Bloomberg
Bonnie Chan, chief executive officer of Hong Kong Exchanges & Clearing Ltd, during the listing ceremony of Black Sesame International Holding in Hong Kong on August 8. Photo: Bloomberg
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