What China's listing frenzy in Hong Kong means for investors

Straits Times

19-06-2025

Listing in Hong Kong means Chinese companies can enjoy the best of both worlds: access to global funds as well as attracting domestic investors. PHOTO: AFP
– Chinese companies are lining up in droves to list on the Hong Kong stock exchange, sparking a frenzy in a market that has been forsaken by investors and companies for many years.
In May, the world's largest battery maker, Contemporary Amperex Technology, debuted on the Hong Kong Stock Exchange with a HK$41 billion (S$6.7 billion) listing that has been the biggest deal of its kind so far in 2025.
It is paving the way for the likes of luxury carmaker Seres, energy drink heavyweight Eastroc Beverage, robotics firm Estun Automation and other Chinese companies to list in Hong Kong in 2025.
There are at least 150 so-called AH listed companies – firms that have listings in both mainland China and in Hong Kong – the latest being soya sauce giant Foshan Haitian Flavouring & Food, which began trading in the city on June 19.
These companies, most of which are so far state-owned, are poised to increasingly shape Hong Kong's stock market as they keep listing their shares in the city. Here is what you need to know.
Why do Chinese companies want to list in Hong Kong?
Listing in Hong Kong means Chinese companies can enjoy the best of both worlds: access to global funds as well as attracting domestic investors.
Companies can list elsewhere, like in the US, to tap global funds, but the majority of China's 210 million retail traders are deterred by the inconvenient time difference and Beijing's capital controls.
Chinese residents are limited in how much money they can convert into foreign currency, with an exchange quota of US$50,000 (S$64,381) per year.
But mainland investors with more than 500,000 yuan (S$89,490) in their stock accounts can access companies on Hong Kong's Hang Seng Composite Index – and others – by using a two-way market access programme, known as the Stock Connect, without personal quota restrictions.
For many of these companies, getting proceeds in the form of the Hong Kong dollar – which is more fungible than the Chinese renminbi – can facilitate global expansion plans.
Beijing has called for leading companies to go global amid cutthroat competition at home and as trade tensions raise the need for companies to diversify their manufacturing locations.
Are there disadvantages?
The potential downside for these companies is that Hong Kong is more exposed than mainland stock exchanges to geopolitical headwinds and is more vulnerable to a sudden or broad sell-off by global investors.
It is much easier to short a stock in Hong Kong compared with the mainland, where such trades have dried up, and the absence of a known stabilisation fund means that index-level panic selling can get much uglier.
The vast majority of companies that already have a listing in the mainland trade at a discount in Hong Kong.
It is partly because of a difference in taxes for mainland investors, which discourages them from buying more Hong Kong-listed stocks once they rise beyond a certain level relative to its mainland-listed peer.
However, that is increasingly shifting.
They could also be valued less by foreign investors who might be more cautious about geopolitical risks, regulatory changes or the Chinese economy.
Take state-owned enterprise CNOOC, one of China's largest oil-and-gas producers.
Its Hong Kong shares trade at a discount of nearly 40 per cent relative to its mainland stock, likely because of concerns about geopolitical risks, as the company was blacklisted by the US in 2021.
Why is there interest in Hong Kong now?
There is no one reason that points to why this is happening now but, rather, a confluence of factors.
Firstly, in September 2024, the Chinese government made a policy pivot supporting financial markets as part of its prioritisation of economic growth.
The biggest surprise move then was the introduction of a pair of monetary tools that made it easier for stakeholders and institutions to borrow funds cheaply to buy stocks.
Beijing has also vowed to cut red tape to allow more Chinese firms to list in Hong Kong – especially industry leaders.
Then there was the so-called Deepseek moment earlier in 2025.
Advances in the Chinese company's artificial intelligence capabilities demonstrated the nation's strides in the field despite Washington's tech curbs.
This boosted the investment case for Chinese assets, especially as investors increasingly looked to diversify out of the US.
Chinese companies are hoping to capitalise on this interest.
Meanwhile, Hong Kong has revised its listings rules.
It has lowered earnings requirements for specialist tech firms, paving the way for some listings in growth sectors.
The fact that mainland stock exchanges have kept tight reins on initial public offerings to stabilise the market has further tilted things in Hong Kong's favour.
A string of stellar debuts by some popular firms that have captivated China's younger consumers – Mao Geping Cosmetics, for instance – has others hoping to replicate those successes.
Unprecedented buying of Hong Kong stocks by investors in the mainland over the past year amid expectations that the renminbi would weaken, coupled with dip buying, has also enhanced liquidity in Hong Kong.
How are companies going about it?
Some companies like Bloks are choosing to first list in Hong Kong rather than getting on the long IPO wait line – sometimes as long as three years – in the mainland.
Others, like pig breeder Muyuan Foods, are seeking additional funds from a new larger pool of investors in Hong Kong after years of inactive fundraising in Shanghai or Shenzhen.
Then there are some taking the route of beverage maker Mixue, which scrapped plans altogether for a China listing after the regulatory tightening of IPOs over the past year.
There are also signs that some Chinese companies, amid concerns around US President Donald Trump's erratic foreign policies – including chatter that Chinese firms will be delisted from Wall Street – may be opting to list in Hong Kong instead of the US or other global markets.
Fast fashion retailer Shein is the most prominent example.
The company is said to be considering switching its IPO to Hong Kong instead of London.
What does it mean for the Hong Kong market?
An influx of Chinese firms will make Hong Kong more of an extension of China's mainland market.
These listings are expected to reshape the financial hub with a greater weighting in consumer, tech and industrials – a shift from banks and developers – to reflect Beijing's 'new productive forces', the government's relatively new economic model that prioritizes innovation and high-tech growth.
Chinese firms now account for 70 per cent of the weighting in the Hang Seng Index, up 10 percentage points from 2021.
The proportion of trading done by mainland investors is also picking up, averaging around 45 per cent daily in 2025.
Right now, high-tech sectors are in Beijing's good graces, but it could be a risk for Hong Kong over the long term, rendering a heavier portion of index members susceptible to China's policy whims.
The inundation of big names like CATL is expected to also boost liquidity in the city, in turn lifting valuations of existing stocks.
Daily turnover, the value of shares trading hands, hit a record high in 2025, and the average in May was roughly double that of a year ago.
What does it mean for investors?
Global investors will be able to gain easier access to some of the most interesting Chinese names that they may have missed out on previously.
That could have been due to investor mandates, or in the case of passive funds, could have been due to the disproportionately small weighting of China A shares (stocks that trade on the mainland) in the MSCI Asia Pacific Index, which most regional funds track.
For stock pickers without China share restrictions, the lack of convenience might have been an impediment. Buying Chinese shares via trading links requires the use of a Hong Kong broker and a custody account.
What is more, A shares on growth boards like ChiNext can be accessed only by institutional investors.
As a requirement of the Chinese government, once the total foreign ownership of a single stock reaches 28 per cent, the exchange blocks all non-Chinese buying until the percentage slips below a threshold of 26 per cent. These obstacles do not exist for H shares.
Mainland investors buying Hong Kong shares are also subject to a 20 per cent dividend tax.
In the case of so-called red chip stocks, the levy is 28 per cent.
Tax on mainland-traded shares, by comparison, is waived after a yearlong holding period, or halved if investors refrain from trading for one month.
Are there risks for investors?
Exposure to companies tied to China's tech push could also be a risk for investors who are not familiar with the intricacies of Chinese policymaking.
Usually, hints of a crackdown or indications of support from the government are subtle and come before they get on global investors' radars.
Fund flows are also a two-way street for these listed companies.
Global money can exit a market much faster than it might enter one, as the past years have demonstrated.
It took just four months for overseas investors to shed 200 billion yuan of Chinese stocks in 2023, but much longer to buy the same amount.
Hong Kong is also a much more volatile market with no trading limits, unlike Shanghai and Shenzhen, which typically cap moves at 20 per cent daily, and allow same day trading which makes it easier to speculate on short term moves. BLOOMBERG
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