In the first quarter of 2026, frequent listing ceremonies at the Hong Kong Stock Exchange could not conceal the "structural boom" pattern in the Hong Kong IPO market. Data shows that by the end of the quarter, 40 mainland companies had listed in Hong Kong. In the final week of March alone, four companies rang the opening bell on the same day. Among them, Deshi Biology surged over 120% at the opening, while Extreme Vision saw its gains exceed 100% at one point. Hantian Tiancheng reached a market capitalization exceeding HKD 40 billion, reflecting strong market enthusiasm and notable profits from new share subscriptions. Meanwhile, nearly 500 companies are still waiting in the IPO pipeline.
In terms of fundraising, the total amount raised in Hong Kong IPOs during the quarter surpassed HKD 100 billion. However, behind the excitement lies another set of figures: as of March 30, 24 out of the 40 newly listed stocks had fallen below their issue prices, representing a breach rate of 61.54%. In the same period last year, the IPO breach rate was only 27.6%. Although the first-day breach rate stood at just 12.5%, very few cornerstone investors and retail investors were able to sell on the listing day to lock in profits.
Capital flows have also shown a clear divergence. Firms in hard technology, AI, and new energy sectors are highly sought after, while traditional industries or companies with insufficient subscription have been largely overlooked. The upcoming wave of share lock-up expiries is another concern for investors. This year, restricted shares worth approximately HKD 1.6 trillion in market value are set to be unlocked in Hong Kong, with over HKD 530 billion due in September alone.
The profit-making effect of new share subscriptions is diminishing, similar to the situation in A-share IPOs several years ago. The "subscribe and profit" phenomenon has become increasingly difficult amid rapid market expansion. According to CITIC Securities research, the IPO breach rate in Hong Kong was only 27.6% in 2025, the lowest since 2018, with median and average first-day returns reaching multi-year highs, creating an impression of guaranteed profits. Huatai Securities research indicated that the average opening return for Hong Kong IPOs in 2025 was around 40%, while the breach rate dropped to a record low of 28%, significantly below the average since 2018.
Statistics reveal a sharp divergence among the 40 new listings. The top ten gainers were dominated by software services, semiconductors, and pharmaceutical biology sectors. AI companies such as Zhipu, MiniMax, and Extreme Vision led the gains, while semiconductor firms like兆易创新 and天数智芯 also saw increases exceeding 50%. In contrast, traditional manufacturing, food and beverage, non-ferrous metals, and hardware equipment companies were heavily represented among those falling below their issue prices.优乐赛共享 saw its post-listing return plunge by 64.55%, while红星冷链,卓正医疗, and爱芯元智 each declined by over 30%. Even industry leaders like牧原股份 and东鹏饮料 were not spared from breaching their issue prices.
Analysis indicates three common characteristics among companies that fell below their issue prices: First, low industry growth prospects, particularly in traditional consumption, manufacturing, and logistics sectors, which lack compelling growth narratives and fail to attract capital. Second, a disconnect between valuation and fundamentals, with some companies issuing shares at price-to-earnings ratios significantly above industry averages, leading to rapid post-listing valuation corrections. Third, small market capitalizations and poor liquidity, making small-cap stocks vulnerable to sharp declines even with limited selling pressure.
Behind the strong IPO activity lies an underlying challenge: a noticeable divergence in secondary market capital flows. Excluding岚图, which listed through an introduction, 24 of the remaining new listings had fallen below their issue prices by the end of the quarter, representing a breach rate of approximately 61.54%—significantly higher than the 27.6% recorded for the full year 2025. Ten of these companies had declined by more than 20% since listing. Notable examples include红星冷链 and卓正医疗, which fell by 46.59% and 44.39%, respectively.优乐赛共享 and埃斯顿 breached their issue prices on the first trading day, dropping 43.64% and 16.02%, and have since declined further by 37.10% and 11.40%, respectively.
Falling below the issue price poses a significant test for secondary market subscribers. In the past, investors tended to hold newly subscribed shares for some time to maximize profits. However, this strategy is no longer viable. Unlike A-shares, Hong Kong stocks have no daily price limits. If investors collectively sell a newly listed stock due to pessimism, gains from the first trading day can be erased entirely by the second day, potentially resulting in losses.
The "structural boom" in Hong Kong IPOs stems from a combination of macroeconomic conditions and market micro-mechanisms. Some brokerages point to tightening U.S. dollar liquidity as a key external factor affecting the Hong Kong market in Q1 2026. The end of the Fed's rate-cutting cycle and rising expectations of rate hikes have strengthened the U.S. dollar, prompting international capital outflows from Hong Kong and putting overall liquidity under pressure. Additionally, since March, the Hang Seng Index and Hang Seng Tech Index have trended downward, reducing investor risk appetite and lowering tolerance for high新股 valuations.
From the supply side, the surge in IPO numbers and fundraising规模 has significantly diverted market capital. The HKD 100 billion raised in Q1 represents a year-on-year increase of over 460%. The concentrated issuance of several large IPOs has created a "capital drain" effect, locking substantial funds in the primary market and accelerating the turnover of capital chasing new listings in the secondary market. On the issuance side, high pricing and over-optimistic expectations are major contributors to post-listing declines. Some new listings were priced at P/E ratios well above industry averages, leading to rapid valuation adjustments and subsequent price drops. In terms of market support mechanisms, the absence of cornerstone investors for certain stocks has left them vulnerable to selling pressure, making it difficult for share prices to stabilize.
Even some large-cap new listings that adopted discounted pricing relative to their A-share counterparts still experienced breaches. For instance,东鹏饮料 was issued at a 14.1% discount to its A-share price,兆威机电 at a 37.7% discount,龙旗科技 at a 43% discount, and豪威集团 at a 29% discount. Yet, all have since declined by over 15% from their issue prices. Extreme cases are also emerging. For example,同仁堂医养, a century-old company originally scheduled to list on March 30, postponed its IPO due to insufficient subscription. Its valuation was questioned as significantly elevated—at the upper end of the proposed price range of HKD 8.30 per share, the company's post-issue market cap would have been around HKD 3.86 billion, implying a P/E ratio exceeding 80 times its 2024 net profit. In comparison, Hong Kong-listed peer固生堂 trades at a P/E of about 19, while group companies同仁堂科技 and同仁堂国药 both have P/Es below 20.
The high breach rate reflects not merely a cooling market but a more discerning capital allocation process. Hong Kong is a highly market-driven environment where investors are willing to pay a premium for companies with high growth potential and certainty, while showing reduced tolerance for traditional sectors with weak performance and limited growth prospects. Future IPO performance will depend not only on company size but also on industry characteristics, growth potential, and reasonable pricing. In this context, the pricing function of the Hong Kong market is strengthening. For companies, an IPO is no longer just a fundraising event but a global validation of value.
Looking ahead to Q2, CICC expects Hong Kong IPO fundraising activity to remain robust, but the pace and quality of listings will become more critical variables. On one hand, the advancement of large project pipelines could further increase fundraising规模. On the other hand, continuous IPO expansion may divert capital from existing stocks, particularly in the second half of 2026 when a large number of newly listed companies will see their lock-up periods expire, potentially increasing market volatility.
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