Hong Kong and India are a success year for fundraising in Asia

Not long ago, Hong Kong’s stock sales market was a symbol of China’s slowdown: deal books were thin, investor sentiment was poor and bankers were fleeing the sector. This year the script has been flipped. Stock sales nearly quadrupled to more than $73 billion through IPOs, placements and block transactions. For the first time since 2013, this made Hong Kong the number 1 fundraising spot in Asia, just behind the US globally. The city is at the forefront of a deal boom across the continent, including a record year for IPOs in India and strong markets in mainland China and Japan.

In Hong Kong, Chinese companies fueled the frenzy with massive deals to fuel their global expansion plans. Battery maker Contemporary Amperex Technology raised $5.3 billion in the world’s second-largest listing in May. Electric vehicle manufacturer BYD Co. and EV-to-smartphone giant Xiaomi Corp. also raised more than $5 billion each through equity placements. The deals even advanced as the US imposed tariffs, and some faced pushback from US politicians.“This year has exceeded expectations,” said James Wang, head of equity capital markets for Asia excluding Japan at Goldman Sachs Group Inc. “We expect volumes to continue to rise, albeit at a more moderate pace.”

The revival has a broad base in Asia. Four of the world’s five largest share sales locations are on the continent, with India, mainland China and Japan following closely behind Hong Kong. For the first time, four Asian markets were among the world’s top five in share sales, according to data from Bloomberg.

Hong Kong’s IPO pipeline also looks healthy, with about 300 companies waiting to list their shares, the Hong Kong Stock Exchange said. In a sign of the feverish pace of dealmaking, Hong Kong Exchanges & Clearing and the market watchdog had to scold the banks for filing careless applications. The flood of deals is also making some investors cautious.

“Investor discipline in terms of valuation and fundamentals is likely to be higher after such a strong year,” said Zhe Song, senior investment specialist at BNP Paribas Asset Management in Hong Kong. Song said his team-managed funds would selectively participate in high-value deals in innovation, heavy machinery manufacturing for use in robotics and new consumer trends. The flurry of stock sales is in stark contrast to the drought that began in 2022, as borrowing costs rose, U.S.-China tensions increased and Beijing cracked down on its own tech giants.

This year, the Hong Kong market has benefited from Chinese ambitions in artificial intelligence, advances in biotechnology, Beijing’s efforts to stimulate domestic demand and the rise in global gold and aluminum prices. All the while, stock selling had been relatively subdued in mainland China, where returns had outpaced those in the city in recent years.

“Sectors that are still aligned with China’s key strategies will be more active in pursuing an IPO,” said Shi Qi, deputy head of capital markets at China International Capital Corp. This includes companies related to technology, advanced manufacturing and robotics, Shi said.

The heavyweight contenders expected to come to the Hong Kong market next year include those whose shares are not traded elsewhere. That would mark a new wave of deals on top of the second listing of China-traded companies that have dominated the pipeline this year. Among the biggest potential IPOs are Chinese Swiss agricultural technology company Syngenta Group and CK Hutchison Holdings Ltd.’s health and beauty retailer AS Watson Group, people familiar with the matter said. China’s AI darlings are also expected to list their shares.

“If you look at the pipeline, it’s huge,” said Peihao Huang, head of Asia-Pacific equity capital markets at JPMorgan Chase & Co. “The test will be how the market will absorb that supply, at what valuation and at what pace, because it hasn’t been that busy in recent years.”

Hong Kong listings have generated a weighted average return of almost 50% this year from their debut prices, outperforming the Hang Seng Index. But how many of the 300 deals come to fruition next year – and how well they do so – will depend on the performance of the broader stock market.

Although the Hang Seng Index is up 29.5% this year, on track for its best performance since 2017, signs of weakness emerged in the fourth quarter. Chinese stocks in Hong Kong in particular have retreated recently due to lingering concerns about technology valuations and as fiscal stimulus that some investors have been betting on has failed to materialize.

“Investors are likely to be a bit more price-conscious and selective when it comes to participation,” said Rob Chan, head of the Asian equity capital markets syndicate at Citigroup Inc. Chan said he still expects a busy 2026, with the expiration of this year’s listing lockup potentially fueling block trades by existing shareholders, additional share sales by companies and the issuance of bonds that can be converted into shares.

The dominance of Asia
Elsewhere in Asia, India has also picked up a share of the region’s deals.

“Today we have many more multi-billion dollar contracts than ever before,” Manan Lahoty, head of capital markets at law firm Cyril Amarchand Mangaldas, said of the Indian market. “This year itself we would ultimately submit or launch more than all previous years combined.”

In India, IPOs hit a record year for the second consecutive year, raising more than $20 billion, thanks to an ever-increasing pool of money from domestic mutual funds and retail investors. Existing shareholders have also rushed to sell their holdings through block trades.

Major companies slated to list in Mumbai next year include Jio Platforms Ltd., the telecommunications unit of Reliance Industries Ltd., which could be the country’s largest-ever IPO. Global companies could also continue to tap India’s rising valuations to launch subsidiaries, said Peter Guenthardt, head of Asia-Pacific Global Corporate and Investment Banking at Bank of America Corp.

“Every multinational with a sizable Indian business is considering in some way whether to make that piece public,” Guenthardt said.

Lofty valuations
Yet it is precisely those valuations that have raised questions about the longevity of the IPO boom. About half of the more than 300 companies that listed shares in India this year are trading below their debut prices, data compiled by Bloomberg show. The MSCI India Index has risen more than 7% this year, performing less well than the regional benchmark.

“If we were to see a meaningful pullback in the market and a contraction, I think it could deter some investors,” said James Thom, senior investment director of Asian equities at Aberdeen Investments. Thom said he recently avoided participating in the initial public offering of e-commerce platform Meesho Ltd. because of its valuation and because the company has not made a profit. The company’s shares rose more than 50% on its first day of trading.

Still, Thom said he expects earnings growth from Indian companies to support stock market performance next year. “Not all attention may be on the IPO market,” he added.

The euphoria is also visible in mainland China, which surpassed the US as the world’s largest stock-selling market in 2022 before undergoing a self-imposed tightening the following year. Retail investors are clamoring for IPOs from Chinese chip makers – in line with Beijing’s goal of technological self-sufficiency. The shares of market leader Moore Threads Technology Co. rose more than 400% in their recent debut in Shanghai.

Of course, all of this can still be undone by developments beyond the control of dealmakers, such as geopolitics.

“Whether next year will actually surpass the amount raised this year in IPO fundraising is still a bit difficult to say,” John Lee, co-head of Asian country coverage at UBS Group AG, said of the Hong Kong market. “At least for the first half of the year, the total issuance volume will still be at the same level, if not higher, than this year.”