On April 19th, the China Securities Regulatory Commission (CSRC) announced a series of capital market measures, including support for mainland industry leaders to list on the Hong Kong Stock Exchange.

The CSRC's support for mainland industry leaders listing on the Hong Kong Stock Exchange is expected to stimulate the enthusiasm of mainland companies to list in Hong Kong. With more companies that have long-term development and growth potential choosing to list in Hong Kong, it will attract more international capital to the city and strengthen Hong Kong's position as an international financial center. Additionally, this measure is expected to benefit Hong Kong's new stock listing market, and it is anticipated that the IPO market activity on the Hong Kong Stock Exchange will rebound in 2024.

Policy Background of Encouraging Mainland Industry  Leaders to List in Hong Kong

1. Vital Component of Capital Market Reforms

China has been committed to deepening capital market reforms to enhance market vitality and efficiency. By supporting mainland industry leaders to list in Hong Kong, it can attract more companies with high growth potential and innovation capabilities, further promoting market development and reforms.

2. Facilitating Mainland-Hong Kong Financial Opening Initiatives

As an international financial center, Hong Kong has a mature capital market and wide participation from global investors. Encouraging mainland companies to list in Hong Kong can further facilitate the interconnection between mainland and Hong Kong capital markets, enhance cooperation and communication between financial institutions in both regions, and strengthen the integration of mainland with international financial markets.

3. Enhancing International Competitiveness and Visibility of Mainland Companies

Hong Kong serves as a preferred gateway and platform for mainland companies to enter international markets. Listing in Hong Kong can provide companies with a broader investor base, increase exposure and market recognition. Additionally, Hong Kong's capital market is relatively mature with higher valuation levels, which benefits companies in terms of financing capabilities and enterprise value enhancement.

Impacts on the Hong Kong IPO Market

· 12 IPOs on the Hong Kong Stock Exchange this year

According to the China Securities Regulatory Commission （CSRC), since the implementation of the overseas listing filing management rules one year ago, 72 companies have successfully completed their initial public offerings (IPOs) in Hong Kong. The smooth channels for listing and financing in Hong Kong have effectively supported the regulated development of mainland companies in both markets and with both resources. The CSRC will further enhance communication and coordination with relevant departments, fully supporting qualified mainland industry leaders to list in Hong Kong and obtain financing.

According to data from the Hong Kong Exchanges and Clearing Limited (HKEX) official website, as of now, a total of 105 applications for listing on the Main Board have been processed. Among them, 36 applications were submitted in 2024. These new applications primarily originate from Mainland China's emerging economy companies, covering sectors such as artificial intelligence, healthcare, and discretionary consumer goods.

As of April 21, the Hong Kong Stock Exchange has welcomed a total of 12 IPO companies this year, with a total fundraising amount of HKD 4.51 billion. Although there haven't been any large-scale IPOs this year, Sutengju Chuangchuang Technology had the largest fundraising amount, reaching HKD 985 million.

The overall performance of newly listed Hong Kong stocks this year has been impressive. According to statistical data, the average first-day increase for new stocks reached 31%. Additionally, some new stocks have performed well after listing. For example, Changjiu Logistics, which listed on the Hong Kong Stock Exchange on January 9, has achieved a cumulative increase of 563.87% as of April 19. Both Asia-Wealth and Leap Holding have also seen cumulative increases of over 200%. Industry experts believe that many companies listed in the first quarter were priced relatively low with discounted fundraising amounts, which allowed them to achieve significant increases after listing. It is expected that there will be more high-quality and scarce IPO choices landing on the Hong Kong stock market, leading to the continued expansion of the new stock profitability effect.

· Boosting Confidence in the Recovery of the Hong Kong IPO Market

1. Increasing Market Vitality and Competitiveness

The listing of mainland industry leaders in Hong Kong injects more vitality and capital flow into the new stock market. These companies usually have high growth potential and market attractiveness, attracting more investor attention and participation, and promoting increased trading activity in the market. It will also increase the competitive landscape of Hong Kong's new stock market, driving market participants to improve service quality, expand product innovation, and reduce trading costs.

2. Strengthening Hong Kong's Position as an International Financial Center

The expansion measures will further enhance Hong Kong's role as an important bridge connecting domestic and foreign capital markets. This allows Hong Kong to better fulfill its unique platform function of attracting funds and high-quality enterprises in both directions, attracting more domestic and international investors to participate in the Hong Kong IPO market and enhancing market vitality and attractiveness.

3. Enriching Investor Choices and Offshore RMB Investment Options

Supporting the listing of mainland industry leaders in Hong Kong enriches the asset allocation choices for domestic and international investors, providing more investment channels and opportunities. This is positive for the prudent promotion of RMB internationalization, contributing to increased usage of offshore RMB and promoting the RMB's position in the international market.

4. Promoting the Development of the Secondary Market

The listing of more companies with long-term development and return potential in Hong Kong will drive the development of the secondary market in the Hong Kong new stock market. This means that investors can trade after listing and have the opportunity to participate in the growth process of these companies, thereby increasing market liquidity and activity.

5. Expanding Choices for Mainland and Overseas Investors

Further expanding the product coverage of the cross-border market connectivity helps broaden investment choices for mainland and overseas investors, providing more investment opportunities. This will attract more capital inflows into the capital markets of both regions, increasing market liquidity and the supply of funds, and promoting the long-term development of the market.

The future development of the Hong Kong IPO market

Recently, Edward Yau Tang-wah has noticed that many mainland companies from Hangzhou and Suzhou have applied or are considering applying for listings on the Hong Kong Stock Exchange. In the future, with the emergence of a large number of dynamic companies from mainland China in emerging industries such as new energy, electric vehicles, artificial intelligence, and biotechnology, the number of technology companies listing on the Hong Kong Stock Exchange will continue to increase.

The Hong Kong Stock Exchange (HKEX) will spare no effort in responding to the increasingly complex international environment and further enhancing the liquidity and vitality of the Hong Kong stock market. HKEX is committed to continuously optimizing the listing regime to make the new stock market more diverse and vibrant. It will also expand the resources available to listed companies and improve market services. At the same time, HKEX will strengthen market infrastructure construction, continuously enrich asset types and product categories, enabling investors to more conveniently manage asset portfolios and hedge risks.

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