(March 30): Hong Kong’s relentless surge in share sales over the past year is beginning to encounter headwinds, potentially slowing deal momentum and raising the stakes for a wave of jumbo transactions in the pipeline.
Listings have raised nearly US$14 billion ($18.05 billion) in the first three months, notching their best quarter since 2021, largely as the result of a record January. But the mood has soured as regulators warned over staff shortages and the quality of paperwork, Beijing rolled out restrictions on some Chinese companies seeking Hong Kong initial public offerings (IPOs) and the war in Iran rattled the cash market.
The near-simultaneous emergence of these obstacles threatens the revival of Hong Kong as a fundraising hub. Listings, placements and block trades totalled more than US$76 billion in 2025 — the highest in four years — helping pull the city’s broader economy out of a prolonged slump.
Deal “execution has become more challenging”, said Cathy Zhang, head of Asia-Pacific equity capital markets at Morgan Stanley. “Companies with strong fundamentals and reasonable valuations can still get deals done, but more marginal transactions may struggle or be postponed.”
How the rest of the year fares depends to an extent on jumbo deals getting done, such as Chinese-owned agricultural-technology firm Syngenta Group’s IPO that may raise as much as US$10 billion. Other high-profile listings in the pipeline include AS Watson Group, a beauty retailer controlled by CK Hutchison Holdings Ltd, and Kunlunxin, the artificial-intelligence chip unit of Baidu Inc.
Morgan Stanley is continuing to see investors engaging on some of its larger IPOs in the works, Zhang said. Global investors remain interested in innovative sectors like technology, AI and health care, she said.
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IPOs globally raised more than US$54 billion this year through March 30, the best first-quarter performance since 2022, and the biggest-ever deal is on the horizon with SpaceX moving toward an offering that could raise more than US$70 billion. But smaller companies around the world have to contend with a stock market downturn weighing on valuations.
The secondary market weakness has been particularly acute in India, where deal activity has slowed after two consecutive record years. Several companies had to downsize deals or decided to postpone IPOs to wait for better market conditions. But India is also preparing for a run of large deals: Asia’s richest person Mukesh Ambani’s telecoms venture Jio Platforms Ltd, the National Stock Exchange of India Ltd, and Walmart Inc-controlled e-commerce firm Flipkart Internet Pvt are among companies preparing for offerings.
See also: Super rich regain zest for Hong Kong as war stokes Gulf unease
Banker shortage
As for smaller deals in Hong Kong in particular, investment banks have to assess whether they have enough people to cover them. The city’s securities watchdog has recommended limiting the workload of lead bankers to five active deals at a time. As a result, some banks have become more reluctant to take on new mandates, people familiar with the matter said.
The overall pipeline is also facing the challenge of Chinese regulators becoming more selective. Beijing has recently discouraged IPO applications by firms registered outside of China that hold assets and businesses within the country and asked some companies to overhaul their structure before proceeding with Hong Kong listings, according to people familiar with the matter. Unwinding those so-called red-chip structures, which allow backers to make use of flexible capital arrangements like weighted voting rights, could trigger large costs and lead to delays.
“This adds complexity to the structuring and can potentially impact the IPO timetable,” Zhang said. “Some companies that haven’t filed, for example, are waiting for more clarity before beginning the restructuring process.”
Restructuring the entity may take at least six months, said Sherlyn Lau, head of capital markets and corporate finance for Asia Pacific at law firm DLA Piper. Among those that have adopted red-chip structures are biotechnology companies, some of which were established in the US by Chinese founders and conduct research and development in China, Lau added.
“It’s not easy,” Lau said. “It’s a big change, and a lot of them would need communication with” regulators.
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One area of the market that is likely to perk up is listed companies looking to raise funds through placements and convertible bonds, especially as so-called blackout periods expire after releasing financial results, said Phyllis Wang, head of Asia-Pacific equity capital markets syndicate at Goldman Sachs Group Inc.
Companies may require deeper discounts to the secondary market for share placements, though their financing plans remain intact, Wang said.
“Investors are cautious on price, not cautious on volume,” she said.
Victoria Mio, a portfolio manager who oversees Chinese stocks at Janus Henderson Group plc, said she had become much more selective in considering cornerstone investments — which involve committing to shares in an IPO while promising not to sell them for a period of time — as the war in Iran raged on. She said she remains interested in participating in IPOs.
“There is no way for us to forecast how the war is going to evolve,” said Mio, whose funds manage about US$300 million. “A long lockup period will be quite risky in this volatile environment.”
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