CNBC Daily Open: Wall Street disregards job losses to focus on cheaper shoes from Vietnam

The financial world is abuzz with the remarkable resurgence of the Hong Kong Stock Exchange’s initial public offering (IPO) market, which has witnessed an extraordinary eight-fold increase in new listing volumes during the first half of this year, rocketing to a staggering $14 billion. This dramatic turnaround marks the strongest period for capital raising in the city since 2021, defying previous years of subdued activity and positioning Hong Kong to potentially eclipse major global players like Nasdaq and the New York Stock Exchange as the world’s leading listing destination. Projections from PwC anticipate up to 100 IPOs in Hong Kong this year, with total fundraising expected to exceed $25.5 billion, underscoring a powerful shift in global financial trends.

This renewed investor enthusiasm is significantly fueled by a confluence of supportive factors, prominently among them being Beijing’s strategic regulatory tailwinds. Following a period where Chinese companies faced tighter scrutiny, the Chinese government has noticeably shifted its stance to actively encourage and support the private sector. President Xi Jinping’s directive to top business leaders in February, coupled with the long-awaited approvals for mainland firms to list offshore, has unleashed a wave of pent-up demand. The Chinese securities regulator’s fast-tracking of approvals for eligible mainland tech companies, alongside Hong Kong’s own “Technology Enterprises Channel” for specialist technology and biotech firms, has provided a much-needed shot in the arm for the city’s IPO landscape, signaling a clear policy-driven push to revive the Hong Kong IPO market.

Another critical driver bolstering Hong Kong’s equity capital markets is the ample liquidity pouring in from mainland investors. These robust southbound net inflows, facilitated by the cross-border Stock Connect scheme, reached record highs in the April-June quarter, a stark contrast to the barely budging performance of China’s benchmark CSI 300 index. This divergence has prompted onshore investors to strategically redirect capital into Hong Kong-listed equities, with these inflows now accounting for nearly half of Hong Kong’s daily stock turnover. This substantial capital injection from the mainland is not only chasing an artificial intelligence frenzy sparked by breakthroughs from companies like DeepSeek but also actively participating in major capital-raising deals, underscoring Hong Kong’s increasing appeal as a preferred investment destination for Chinese capital.

Furthermore, escalating geopolitical tensions, particularly the persistent delisting fears for Chinese companies listed on U.S. exchanges, have undeniably steered mainland firms towards Hong Kong as a more secure and viable fundraising hub. This environment has prompted a flurry of China-traded companies to seek secondary listings in Hong Kong, essentially providing a crucial “Plan B” or “extra insurance” against potential forced delistings from American markets. A prime example is battery giant Contemporary Amperex Technology (CATL), which secured over $5 billion in a secondary listing in Hong Kong in May, marking the world’s largest such offering this year. This strategic move highlights a broader trend where companies are proactively hedging against regulatory uncertainties and prioritizing Hong Kong for their equity capital needs.

Hong Kong’s market also offers a more inclusive environment for emerging sectors, aligning seamlessly with the evolving needs of mainland firms. Unlike some more traditional markets, Hong Kong has shown a strong appetite for companies in cutting-edge fields such as AI, renewable energy, digital consumption, and biotechnology. This inclusivity, coupled with Beijing’s call for its leading companies to expand globally and diversify manufacturing locations amidst domestic competition and trade tensions, makes Hong Kong an attractive gateway for international expansion. Companies are increasingly leveraging Hong Kong’s liquid market and the fungibility of the Hong Kong dollar to fund their globalization strategies, reflecting a strategic pivot towards offshore fundraising for international reach.

The tangible results of these combined forces are evident in Hong Kong’s impressive market performance; the Hang Seng index has gained a stellar 21% so far this year, making it one of the best-performing major markets globally. With over 200 active IPO applicants in the pipeline, including more than 40 companies already listed on mainland exchanges and high-profile primary listings like Mixue Group, Hong Kong is cementing its status as a robust and dynamic financial center. This revitalization signals a new era for Hong Kong IPOs, driven by strategic policy support, robust investor confidence, and a pragmatic response to the shifting landscape of global finance and US-China Relations, solidifying its pivotal role in Chinese Capital Markets and beyond.