The Sword Over Hong Kong Stocks: IPO Peaks And Unlocking Waves

Do IPO peaks and unlocking waves materially influence Hong Kong equity performance? In 2025 the Hong Kong Exchanges recorded 117 initial public offerings that raised HKD 285.9 billion, returning the exchange to the top of global IPO rankings after a four‑year interval. Market participants expect IPO fundraising in 2026 to remain robust and potentially exceed HKD 300 billion. As of 10 January 2026, roughly 300 companies remained in the Hong Kong IPO queue, with the bulk concentrated in technology—software services, hardware equipment and semiconductors—and healthcare, including biopharmaceuticals and medical devices and services. This sectoral concentration reflects the availability of Chapter 18A and Chapter 18C listing routes on the Hong Kong Exchange, which permit dual‑class share structures and listings for pre‑revenue biotech and specialized technology firms respectively. Current queue data show software services leading with 61 applicants, followed by biopharmaceuticals with 51 and hardware equipment with 45; semiconductors and medical devices and services account for 23 and 16 applicants under hearing respectively.

A longer‑term perspective suggests that peaks in primary‑market activity do not, by themselves, reverse the broader trend of the Hong Kong market. Historical episodes demonstrate that fundraising surges—whether measured at IPO or including subsequent capital raises such as placements, rights issues and consideration issuances—have often coincided with market upturns rather than precipitating declines. Fundraising highs in 2010, 2014–2015, 2017, 2020 and 2025 all occurred alongside bull markets, a pattern consistent with companies choosing to access capital markets when market conditions improve and expansion opportunities arise.

IPO waves can, under certain conditions, amplify demand for Hong Kong dollars and trigger currency dynamics that further support equities. When offshore demand for HKD intensifies, the Hong Kong Monetary Authority may intervene to maintain the currency peg, injecting liquidity into the interbank market and compressing HIBOR, which can in turn bolster equity market momentum. A recent example occurred in April–May of the prior year, when strong financing activity, corporate dividends and buybacks, and inflows from southbound and foreign investors pushed HKD demand to the strong‑side convertibility threshold, prompting the HKMA to inject liquidity and drive HIBOR to historic lows.

The more direct market impact of IPOs often emerges through the unlocking of cornerstone and controlling shareholder lock‑ups roughly six months after main‑board listings. Historically, unlocking waves have coincided with market weakness in mid‑2011, the second half of 2015, March 2019, the second quarter of 2021 and mid‑2022. At the stock level, companies such as Contemporary Amperex Technology Co., Ltd. (CATL) and Jiangsu Hengrui Medicine experienced notable pullbacks in the week preceding their November unlockings, followed by rapid stabilization and rebounds once lock‑ups expired.

That said, unlocking does not automatically translate into forced selling. The expiration of lock‑ups merely permits cornerstone investors to sell; it does not compel immediate liquidation. When company fundamentals outperform expectations, new demand from index funds, southbound flows and foreign investors can absorb or even exceed the supply from unlocking shareholders. The unlocking wave in the second quarter of 2025 illustrates this dynamic, as the market did not decline despite significant scheduled unlockings.

Looking ahead, March and September 2026 may see another round of unlocking among mid‑to‑large cap issuers with market capitalizations above HKD 30 billion. Potential examples include Zijin Mining International and Chery Automobile, with September’s unlocking scale estimated at around HKD 400 billion. It is important to note that current unlocking estimates for 2026 do not yet incorporate cornerstone investor unlockings from IPOs that occur in the first half of the year. Conventional calculations that aggregate unlocking across all Hong Kong listings can overstate the practical sellable supply, because shares of smaller, less liquid issuers may be difficult to offload even after lock‑ups expire. For this reason, unlocking statistics are often presented under two lenses: one limited to companies with market capitalizations above HKD 30 billion and another covering the full universe of Hong Kong listings.

The inclusion of stocks in Stock Connect and the Hang Seng Tech Index also produces observable price dynamics, though effects vary by case. Stock Connect adjustments occur on a semiannual timetable, with regular inclusion windows in March and September and faster, quarterly mechanisms for newly listed companies in June and December. While many large names experience immediate southbound inflows and short‑term price appreciation following inclusion, a comprehensive sample analysis shows that post‑inclusion rallies are not universal; the probability of a sustained short‑term gain is not high enough to constitute a simple timing strategy.

The Hang Seng Tech Index is constructed to represent thirty of the most representative technology‑related Hong Kong listings, subject to industry and innovation criteria and a quarterly review. Institutional anticipation of index rebalancing often leads to price movements roughly thirty days before the execution date. Announcements typically trigger rapid reactions within two to three trading days, and whether a stock is added or removed, prices commonly decline after the execution date before settling within about a week.

Global Capital Flows This Week - In A/H markets, northbound turnover averaged HKD 408.939 billion per day from 5 to 9 January, down HKD 237.561 billion from the prior week. Southbound flows shifted to net inflows of HKD 2.9459 billion for the same period, reversing the prior week’s net outflow of HKD 345.2 million. At the single‑stock level, southbound net purchases were led by Xiaomi Group‑W (net buy HKD 5.553 billion), Kuaishou‑W (net buy HKD 2.287 billion) and Semiconductor Manufacturing International Corporation (net buy HKD 1.719 billion). Leading net sellers included China Mobile (net sell HKD 4.443 billion), the Hang Seng China Enterprises Index ETF (net sell HKD 1.966 billion) and Zijin Mining (net sell HKD 683 million).

On foreign capital flows, A‑share inflows amounted to USD 0.87 million versus a USD 1.3 million outflow the previous week, while H‑share net outflows narrowed to USD 0.23 million from USD 0.79 million. In overseas markets, U.S. equities experienced net outflows with active funds withdrawing USD 478.9 million and passive funds USD 141.7 million, reversing inflows recorded the prior week. Japan recorded net outflows of USD 17.3 million after a prior inflow of USD 111 million, while developed European markets saw inflows increase to USD 229.9 million from USD 107.8 million.

Risk Warnings - Key risks include the possibility of geopolitical conflict driving global inflation materially higher than expected; persistent overseas inflation and resilient U.S. growth that slow the pace of global liquidity easing, including a slower‑than‑expected Fed easing cycle and limited declines in U.S. Treasury yields; weaker‑than‑anticipated domestic growth policies that undermine economic recovery and risk appetite; and model limitations arising from reliance on historical data, which may affect the validity and applicability of projections.