Hong Kong Stock Market Sees Resurgence in Listing Activities, Signaling a Potential Rebound
Hong Kong’s stock market has experienced a significant turnaround in 2024, marking a notable resurgence in listing activities after a prolonged period of decline. Following three consecutive years of decreased deal values, the Hong Kong stock exchange witnessed a substantial jump in new listings, fueled by increased optimism amongst investors and a renewed commitment from Beijing to support the offshore market. This revival is not merely a fleeting trend, but rather a sign of growing confidence in Hong Kong’s economic potential, attracting both domestic and international investment.
Key Takeaways: Hong Kong’s Stock Market Revival
- Record-breaking increase in deal value: Hong Kong raised a combined $10.65 billion across 63 deals in 2024, representing an over 80% increase compared to 2023, which saw the lowest levels since 2001.
- Beijing’s unwavering support: The Chinese securities regulator’s April pledge to support the Hong Kong market and facilitate more IPOs from mainland companies played a crucial role in boosting investor confidence.
- Increased average deal size: The average deal size almost doubled in 2024 as the market experiences this recovery, with an average value of $169 million compared to the previous year, signaling stronger investor commitment per transaction.
- Global ranking: Hong Kong is poised to rank **fourth globally** in terms of funds raised through IPOs in 2024, trailing only the United States and India.
- Cautious optimism: While the resurgence is encouraging, experts advise caution, highlighting the need for continued economic improvement in mainland China and a softening of geopolitical tensions for sustained growth.
‘Signs of Life’: A Market Rebound in Hong Kong
For several years, listing activity in Hong Kong had been on a downward trend. Geopolitical tensions, coupled with globally higher interest rates, significantly dampened investor enthusiasm for Hong Kong and Chinese equity markets. China’s economic slowdown and a persistent housing market crisis further exacerbated concerns regarding company valuations.
Shifting Investor Sentiment
However, investor sentiment has undergone a noticeable shift in 2024, particularly towards sectors anticipated to benefit from Beijing’s policy support, such as consumption-related businesses. The significant listing of Midea Group, a major consumer product manufacturer, in September, serves as a powerful indicator of this improving sentiment. Its share price has surged over 36% from its IPO price, fueled by investor optimism regarding its prospects within Beijing’s “trade-in program” designed to encourage upgrades.
Sustained IPO Pipeline
As of November 29th, the Hong Kong Stock Exchange reported a robust 90 IPO applications pending listing or under processing, strongly suggesting a continued influx of companies seeking public offerings. While experts predict a gradual, rather than immediate, recovery in IPO activity for 2025, this substantial pipeline points towards a sustained market resurgence.
Mainland and Foreign Investment
The return of significant investment is particularly encouraging. Mainland investors have poured $96.4 billion into Hong Kong stocks in 2024, surpassing 2023’s total and approaching the record-breaking $87 billion surge seen in 2020. Notably, there is also a “gradual return of foreign long-only funds to China and Hong Kong equities,” a further indication of restored confidence in the market.
‘No Santa Rally’: A Cautious Outlook
Despite the positive developments, the resurgence is not without its challenges. Not all newly listed companies have experienced success. Horizon Robotics and China Resources Beverage, two sizeable IPOs in 2024, have witnessed share price declines of 12% and 11% respectively from offer price levels. This underscores the need for sustained positive developments to solidify the market rebound.
Maintaining Momentum
Experts emphasize that investors require “concrete evidence of stimulus policy effectiveness” to maintain confidence. While the Hang Seng Index is on track for its first annual gain in five years, having risen over 16%, the recent rally propelled by Beijing’s stimulus package has somewhat lost momentum. This cautions against premature conclusions of sustained upward movement. A continued, gradual recovery is considered more realistic than a drastic one. The market remains “trapped and range-bound,” according to China Renaissance’s Maynard, with Beijing’s recent stimulus announcements underdelivering thus far and indicating that a quick rally is unlikely.
The resurgence of Hong Kong’s stock market is a welcome development showing significant potential for future growth. However it is a recovery that needs careful monitoring and sustained commitment from both the government and investors alike for future sustainability.
