In our latest Monthly View for Baiguan Pro subscribers, we expressed a cautious view of the Hong Kong market relative to the China onshore market. One of the reasons we cited was the hangover after a historic IPO wave since 2025.
In 2025, Hong Kong roared back to the top of the global leaderboards, hosting 119 IPOs that raised a massive US$37.4 billion, a blistering 231% surge over 2024.
2026 is even hotter. In Q1, HKEX just wrapped up its strongest first quarter in a long while, printing 40 new listings that raised a staggering HK$110 billion, nearly six times the capital raised in Q1 of last year.
The structural drivers are real and should not be dismissed. HKEX’s Chapter 18C framework for specialist technology companies has given AI leaders such as Minimax and Knowledge Atlas a fast track to the capital market. A+H dual-listing momentum is running hot, helping a long line of established A-share giants, from CATL to Montage, find an overseas fundraising platform in Hong Kong. Foreign capital that had been avoiding Chinese equities is dipping back in, looking for a regulated, liquid, internationally accessible entry point. Hong Kong is, structurally, better positioned as a listing venue than it has ever been.
But our memories still beg us to consider this: when the market runs this hot, what does it typically mean for the investors already sitting in the secondary market? Is the IPO boom a celebration of a rising market, or is it the last act before the curtain falls?
Where Does the Money Come From?
The intuition is simple. When a company lists on the Hong Kong Stock Exchange, it issues new shares to the public. The public pays cash. That cash goes to the company (or to selling shareholders). It does not stay in the secondary market.
In other words: a large IPO market is, by definition, a large liquidity extraction machine. Every dollar parked in a subscription form is a dollar not buying Tencent, CNOOC, or Alibaba. Every HKD 100 billion raised in new listings is HKD 100 billion that has, at least temporarily, left the pool of capital competing for existing shares.
Furthermore, behind every single one of those blockbuster IPOs sits a ticking clock. As the standard 6-month and 12-month lockup periods on these multi-billion-dollar tech, AI, and biotech giants begin to lapse over the coming months, a massive wall of secondary paper will suddenly become freely tradable and is about to hit the market.
The counter-argument is that IPO activity reflects investor confidence, which is itself a symptom of a rising market. Busy IPO calendars happen during bull runs, not bear markets. Correlation, if it exists, might run the other way: good markets attract listings, not the reverse.
The data, however, tells a more interesting story. The relationship is not contemporaneous, but forward-looking. Heavy IPO years tend to be followed by weak secondary market performance, sometimes severely weak.
