Hong Kong remains a leading global market for initial public offerings, outperforming New York and Nasdaq in funds raised last year, according to KPMG. The momentum continued into the first quarter of this year, with over 600 companies currently awaiting listing on the Hong Kong exchange. However, this boom is accompanied by a significant challenge: a growing trend of weak stock performance post-debut.
Out of 179 listings since January 2025, approximately half have seen their stock prices trade lower over the past three months, contrasting sharply with a mild drop for the benchmark Hang Seng index and gains of over 10% for the FTSE Renaissance Global IPO Index during the same period. Goldman Sachs, which initially projected $60 billion in Hong Kong listings for this year (nearly double 2025's $36 billion), has since downgraded Hong Kong H shares in favor of mainland Chinese A shares, citing greater exposure to AI hardware plays.
This underperformance is particularly acute for stocks included in the Stock Connect program, which allows mainland Chinese investors direct access. While some of these stocks, like AI startup Deepexi, surged by over 300% between their IPO and their inclusion in the Connect program, all eight of the top performers have since dropped by 10% or more, with Deepexi down 51% as of June 3. Analysts suggest that capital often retreats to cheaper A shares after Hong Kong listings join the Connect program. Beijing is reportedly taking notice, with State-backed Securities Times highlighting concerns over these sharp rallies and subsequent declines.
