Hong Kong eases listing rules to boost red-hot IPO market

[HONG KONG] Hong Kong eased some of its rules to list in the city, potentially bolstering what’s already been one of the hottest markets in the world for initial public offerings this year.

Starting next week, the city will ease minimum float requirements for mainland China-traded companies seeking to add a listing in Hong Kong, and allow for big funds to secure bigger share allocations than retail investors, according to a Hong Kong Exchanges & Clearing statement on Friday (Aug 1).

The new rules are likely to boost institutional investors’ influence during the pricing of new listings, and the move comes after a consultation with market participants that wrapped up in March. It paves the way for more companies, particularly mainland Chinese ones, to go public in Hong Kong after attracting the world’s biggest listing of 2025.

New listings have fuelled Hong Kong’s revival this year, driven by a slew of Chinese companies adding an extra listing in the city, including battery-giant Contemporary Amperex Technology Ltd’s blockbuster deal – the biggest of its kind in 2025 globally. That helped the city reclaim its standing as the world’s second-largest market for share sales for the first time since 2012, reversing a yearslong slump following the Covid-19 pandemic.

The changes are part of a broader push by Hong Kong to solidify its place as Asia’s premier financial centre and lure more investors from outside traditional sectors. It allowed some companies to file confidentially, and for big firms already listed on the mainland Chinese bourses, Hong Kong promised to speed up the process for listing applications to 30 days.

One of the rule changes will lower the minimum percentage of shares required to be listed. Previously, companies already listed in mainland China had to offer at least 15 per cent of their total number of shares in Hong Kong to add a listing there. After the change, the minimum threshold will be lowered to 10 per cent.

The exchange will conduct a two-month public consultation on whether to lower minimum float requirements for China-traded issuers further to 5 per cent after they are listed.

Clawback

The exchange also lowered the maximum proportion of shares that can be allocated to retail investors to 35 per cent, down from 50 per cent currently. The exchanged had initially proposed to cut it to 20 per cent.

Previously, new listing that were highly sought after by retail investors would trigger a so-called clawback mechanism that would increase the number of shares available to them by redistributing stock that had been allocated to institutional investors.

The change aims to minimise the risk of initial public offerings being overpriced during bookbuilding, which can result in a greater risk of a price slump after listing, the exchange said in a December paper.

The retail frenzy around the likes of Mixue Group’s Hong Kong debut was so intense that the securities regulator put a cap on margin loans and launched a review of the brokers that were most active in the deals. BLOOMBERG