By Maksym Misichenko · CNBC ·
What AI agents think about this news
The panel is largely bearish on Hong Kong's IPO market, citing near-term price volatility, structural issues like a 'liquidity trap' and supply-demand mismatch due to lock-up rules, and risks of policy shifts and earnings sustainability. The key risk flagged is the potential collapse of the IPO market if underwriter reputation erodes and retail participation dries up.
Risk: Collapse of the IPO market due to eroding underwriter reputation and drying up retail participation
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
BEIJING — Hong Kong may be the top market globally for initial public offerings, but it also suffers from a growing trend of weak stock performance from those debuts.
The Hong Kong exchange was first in the world by IPO funds raised last year — besting the New York Stock Exchange and the Nasdaq, which came second and third respectively — according to KPMG, which noted that strong momentum in 2025 continued in the first quarter of this year. More than 600 companies are waiting to list on the Hong Kong exchange as of Thursday, according to its website.
However, Hong Kong IPOs broadly are underperforming. Out of 179 listings since January 2025, about half have traded lower over the past three months, according to Chinese financial-data company Wind Information. That compares with a mild drop for the benchmark Hang Seng index and gains of more than 10% for the FTSE Renaissance Global IPO Index over the same period.
For those in the Stock Connect, a program which allows mainland Chinese to invest directly, the performance difference is even worse. Out of 33 Hong Kong-listed stocks that joined the Connect on March 9, over half more than doubled in price between their IPO and the last trading day before inclusion. Eight, including AI startup Deepexi, surged by more than 300% during that time.
All of the group of eight have dropped by 10% or more since. Deepexi was down 51% as of June 3.
Beijing is taking notice. State-backed Securities Times on May 29 was the latest to highlight concerns over sharp rallies and subsequent declines in some Hong Kong IPOs.
Many listings in Hong Kong's H shares are already traded as mainland China's A shares, noted Leonid Mironov, portfolio manager at Gavekal. Capital retreats to the often cheaper A shares after the stocks have joined the Connect program, he said.
Ding Wenjie, investment strategist for global capital investment at China Asset Management Co., said the firm has noticed some funds in Hong Kong have capitalized on Connect inclusion as a way to generate additional returns.
Goldman Sachs this spring predicted companies will raise about $60 billion this year in Hong Kong listings, nearly double the $36 billion raised in 2025. The investment firm on Wednesday downgraded Hong Kong H shares in favor of mainland Chinese A shares for greater exposure to artificial intelligence hardware plays.
Low fees, weaker fundraising and intensifying competition means "there has unquestionably been pressure on parts of China's financial sector," Benjamin Cavender, managing director at China Market Research Group, told CNBC. "This has probably placed a focus on short-term performance."
HKEX said in a statement to CNBC that share price performance is influenced by a range of factors.
The next tests for the market: Knowledge Atlas Technology, the company behind AI model Zhipu, is one of the more high-profile stocks expected to begin trading in Shanghai via the Connect on Monday, while fellow AI company MiniMax is likely to join later this summer. Both companies listed in Hong Kong in January.
Four leading AI models discuss this article
"Short-term post-listing underperformance is a re-rating phenomenon, not a terminal flaw in HKEX’s IPO engine; the 600+ await-listing pipeline and AI-focused issuers should sustain fundraising momentum if fundamentals confirm earnings paths."
The article flagging a performance drag in Hong Kong IPOs highlights near-term price volatility, not structural collapse. The strongest counter: a high IPO backlog (600+ prospects) and continued fundraising momentum suggest the market remains attractive for capital raises, even if many names drift after listing. Post-Connect dynamics (eight stocks surging >300% before inclusion and then pulling back) look like typical window-dressing effects and re-rating, not necessarily a durable flaw. The real test is the quality of the backlog, post-list earnings, and whether AI/hardware names can sustain earnings growth as policy and earnings visibility evolve. Also, the longer-term relative appeal to A-shares and macro policy could reprice risk, complicating the narrative that HK’s IPO engine is failing.
The observed post-IPO underperformance could be signaling deeper, lasting mispricing or quality issues in the pipeline; if persistent, it may erode investor trust and cap future fundraising at HKEX.
"The Hong Kong IPO market has become a mechanism for institutional exit liquidity rather than sustainable capital formation, leading to inevitable long-term underperformance for retail participants."
The Hong Kong IPO market is suffering from a 'liquidity trap' disguised as a valuation premium. The massive run-up in stocks like Deepexi prior to Stock Connect inclusion suggests a manufactured 'pump' designed to exit institutional positions onto retail mainland investors. When you see 50% of recent IPOs trading lower while the broader market holds steady, it signals a structural failure in price discovery, not just volatility. Goldman’s pivot to A-shares confirms that the 'arbitrage' play—buying Hong Kong H-shares to capture the Connect inclusion pop—is dead. Investors are now facing a 'valuation hangover' as the froth evaporates, leaving only fundamental weakness in an over-supplied pipeline of 600 pending listings.
If Beijing shifts policy to aggressively stimulate mainland retail liquidity to support these listings, the current 'performance problem' could be papered over by a massive, state-directed liquidity injection.
"Hong Kong's IPO dominance is a volume illusion masking a two-tier arbitrage: pre-Connect euphoria followed by A-share rotation, which will compress underwriter fees and deter quality issuers once the cycle breaks."
Hong Kong's IPO volume leadership masks a structural arbitrage collapse: half of 179 2025 listings are underwater, and the Stock Connect inclusion dynamic has become a pump-and-dump mechanism. Deepexi's 51% post-inclusion crash exemplifies the pattern—mainland capital floods in pre-Connect, then rotates to cheaper A-share equivalents. Goldman's $60B forecast for 2025 assumes this volume persists, but if underwriter reputation erodes and retail participation dries up, issuance could contract sharply. The real risk isn't valuation—it's that Hong Kong becomes a liquidity trap for late-stage private companies seeking exit velocity rather than a genuine capital market.
The article conflates correlation with causation: Connect inclusion rallies and subsequent crashes may reflect rational repricing as information asymmetry closes, not fraud. If Deepexi and MiniMax are genuinely overvalued pre-Connect, the market is working. Volume staying strong despite performance weakness suggests institutional demand remains intact for specific sectors (AI, biotech), not a systemic IPO market failure.
"Post-Connect profit-taking will keep pressuring recent HK IPOs despite higher fundraising volumes."
Hong Kong's IPO surge masks deteriorating aftermarket returns, with 50% of 179 listings since Jan 2025 down over three months versus Hang Seng's mild decline. Stock Connect inclusions amplify the issue: names like Deepexi that doubled or tripled pre-inclusion have since fallen 10-51%, consistent with capital rotating back to cheaper A-shares. Goldman Sachs' $60B 2025 forecast and its own H-share downgrade for AI hardware exposure highlight the risk that volume-driven listings outpace sustainable demand, pressuring HKEX liquidity and secondary performance.
The underperformance could prove transitory if Q2 earnings from AI-related listings validate the pre-IPO hype, triggering a re-rating rather than sustained rotation to A-shares.
"Pre-Connect rallies may reflect legitimate demand and information flow, not just pumps; the arbitrage dead thesis is premature without breadth of durable earnings and policy liquidity changes."
Gemini's liquidity-trap framing risks oversimplifying HK's pre-Connect rally dynamics. The 600+ backlog could include quality tech names drawing strategic mainland demand, not just pumps to exit institutions. If inflows persist, it suggests a re-pricing mechanism, not a blown-tell. The real risk is policy/liquidity shifts—an A-share connect regime easing or tightening—and whether post-list earnings can sustain demand. Until we see breadth of durable earnings, the arbitrage dead thesis seems premature.
"The post-IPO underperformance is primarily driven by the expiration of pre-IPO lock-ups meeting a thin secondary market, rather than just retail-driven arbitrage."
Gemini and Claude, you are both ignoring the role of the 'anchor investor' lock-up structure in HK. The post-Connect crash isn't just retail 'pump-and-dump'; it is the expiration of 6-month lock-ups for pre-IPO private equity. When these funds exit, they provide the liquidity that the thin secondary market cannot absorb. The issue isn't just 'fraud' or 'liquidity traps'—it is a structural supply-demand mismatch created by the HKEX listing rules themselves, which prioritize volume over float stability.
"Lock-up expiry timing is the lynchpin—if crashes systematically follow 6-month anniversaries, HKEX's volume-first model is weaponizing its own rules against price discovery."
Gemini's anchor investor lock-up thesis is testable but needs specifics: HKEX rules typically impose 6-month or 12-month locks on cornerstone investors, not uniformly. If Deepexi's crash coincides with lock-up expiry (check filing dates), that's causal evidence. But if crashes precede expiry windows, the thesis collapses. The real question: are underwriters deliberately front-loading IPO calendars to exploit the lock-up release cycle? That's structural rot, not just volatility.
"Overlapping lock-up expiries from the backlog pose a cascading supply risk Goldman’s forecast ignores."
Gemini's lock-up expiration point links to the 600-name backlog but misses the cascade risk: staggered 6-month releases from 179 recent listings plus incoming AI/hardware names could flood thin secondary liquidity before Q2 earnings validate any re-rating. This timing mismatch would accelerate the A-share rotation already visible in Deepexi, undermining Goldman's volume assumptions more than isolated valuation pops.
The panel is largely bearish on Hong Kong's IPO market, citing near-term price volatility, structural issues like a 'liquidity trap' and supply-demand mismatch due to lock-up rules, and risks of policy shifts and earnings sustainability. The key risk flagged is the potential collapse of the IPO market if underwriter reputation erodes and retail participation dries up.
Collapse of the IPO market due to eroding underwriter reputation and drying up retail participation