The year-end IPO market on the Hong Kong Stock Exchange is entering its final sprint. Between December 16 and 17, six companies, including NANHUA FUTURES (02691), are set to list. However, investor enthusiasm for these IPOs has shown significant divergence. Data from Futu Securities reveals that as of December 15, three companies, including one with an 834.41x oversubscription rate, have attracted overwhelming demand. In stark contrast, NANHUA FUTURES, a leading player in the futures industry, has seen tepid interest, with its IPO only 0.7x subscribed—the only one among the six companies yet to achieve full subscription.
As the first futures company listed on the A-share market and aiming to become the second "A+H" dual-listed futures firm, NANHUA FUTURES' lukewarm reception raises questions: Is this a temporary setback or a reflection of market concerns over its growth potential, valuation, and IPO terms?
**Pioneer in China’s Futures Market Faces Growth Headwinds** Established in 1996, NANHUA FUTURES was among the earliest futures companies in China. It became the first A-share-listed futures firm in August 2019 and now seeks a Hong Kong listing to join the ranks of dual-listed peers. According to Frost & Sullivan, the company ranked eighth by total revenue in 2024 among domestic futures firms and first among non-financial institution-related futures companies.
NANHUA FUTURES has built a diversified business portfolio, including domestic futures brokerage, risk management services, wealth management, and overseas financial services. Its domestic futures brokerage client assets grew 65.4% from 2022 to 2024, reaching RMB 31.6 billion. Overseas financial services have been a bright spot, with client assets in futures, securities, and leveraged forex brokerage rising 49.6% to HKD 17.8 billion by June 2025, while overseas AUM surged 70% to HKD 3.4 billion. The company also boasts a strong institutional and corporate client base, with 5,279 corporate and 1,872 financial institution clients as of H1 2025.
However, despite its leading position, growth has slowed. Operating income rose from RMB 955 million in 2022 to RMB 1.355 billion in 2024, but growth decelerated from 35.5% in 2023 to 4.8% in 2024. Net profit increased from RMB 246 million to RMB 458 million over the same period, but growth narrowed from 63.8% to 13.7%. In H1 2025, operating income fell 12.1% YoY to RMB 593 million, while net profit edged up just 0.4% to RMB 231 million.
The slowdown is largely attributed to declining commission rates in domestic futures brokerage. Net commission and fee income dropped 11.3% YoY in 2024 to RMB 542 million and fell another 13.9% in H1 2025 to RMB 234 million. The average domestic futures brokerage commission rate slid from 0.334 basis points in 2023 to 0.158 basis points in H1 2025, while the operating margin for this segment dropped from 18.6% to 6.2%.
**Valuation Discount Lags Peers** NANHUA FUTURES' Hong Kong IPO is priced at HKD 12–16 per share, with a minimum subscription of HKD 8,080.68 per lot (500 shares). At the mid-point of HKD 14, this represents a 33.7% discount to its A-share closing price of RMB 19.15 on December 15. While this seems attractive, the discount pales in comparison to peers.
For instance, HONGYE FUTURES (03678), the only other "A+H" listed futures firm, trades at a 70% discount (H/A ratio of 0.3x). Similarly, major brokerages like HUATAI SECURITIES (06886) and CHINA GALAXY (06881) have H/A ratios of 0.76x (24% discount) and 0.6x (40% discount), respectively. This suggests NANHUA FUTURES' valuation discount is less compelling for arbitrage-seeking investors.
**No Cornerstone Investors Add Uncertainty** NANHUA FUTURES' IPO follows HKEX’s "Mechanism B," which allocates only 10% of shares to retail investors with no clawback option—unlike "Mechanism A," which allows up to 35% retail allocation. This low allotment ratio reduces retail participation.
Moreover, the absence of cornerstone investors—typically providing stability with 6–12 month lock-ups—means all shares will be freely tradable upon listing, raising concerns about post-IPO volatility. Recent Hong Kong IPOs with high oversubscription have seen sharp post-listing declines due to short-term leveraged funds exiting quickly. For NANHUA FUTURES, this lack of locked-up shares heightens uncertainty, deterring short-term investors.
**Conclusion** NANHUA FUTURES' weak IPO subscription reflects market caution over its slowing growth, modest valuation discount, and lack of cornerstone support. In contrast to peers with triple-digit oversubscription, this highlights the structural divergence in Hong Kong’s IPO market, where capital favors high-growth, well-priced deals.
Long-term, NANHUA FUTURES' global footprint, diverse licenses, and solid fundamentals remain strengths, and its fundraising focus on overseas expansion aligns with industry trends. However, its IPO experience serves as a reminder for future Hong Kong listings: balancing growth quality, fair valuation, and investor-friendly terms is key to success.
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