^{Source: South China Morning Post}

The recent advancements in artificial intelligence (AI), particularly by China's DeepSeek, have ignited a renewed enthusiasm in Hong Kong's Initial Public Offering (IPO) market. This resurgence comes after a lull of over three years, with Chinese companies seizing the opportunity to go public as global investors refocus on the region.​

DeepSeek's AI Breakthrough Spurs Market Optimism

In late January 2025, DeepSeek unveiled an AI model that rivals OpenAI's ChatGPT in reasoning capabilities but at a reduced cost. This achievement, despite U.S. restrictions on advanced chips for AI training, has bolstered confidence in China's tech sector. The Hang Seng Index responded by surging to three-year highs, reflecting this optimism. ​

Record Influx of Mainland Investments

Mainland Chinese investors have poured a record-breaking HK$435 billion (approximately $55.93 billion) into Hong Kong's stock market in the first quarter of 2025. This marks the highest quarterly inflow since the Stock Connect scheme's inception in 2014, surpassing the previous record of HK$373 billion set in Q1 2021. Major tech firms like Alibaba and Tencent have been primary beneficiaries, with the Hang Seng Tech Index climbing nearly 20% this quarter.

Notable IPOs and Upcoming Listings

The IPO landscape in Hong Kong is witnessing significant activity:​

• Mixue's Oversubscribed Debut: Chinese bubble tea giant Mixue went public on March 3, 2025, with an oversubscribed listing, indicating robust investor appetite.​
• CATL's Anticipated Listing: Contemporary Amperex Technology Co. Ltd. (CATL), the world's leading EV battery manufacturer, filed for a Hong Kong listing in February 2025. The company aims to raise at least $5 billion to support its global expansion plans, including projects in Hungary, Spain, and Indonesia. ​
• Luxshare's Consideration: Luxshare Precision Industry, known for producing Apple AirPods, is contemplating a secondary listing in Hong Kong, potentially raising $2 to $3 billion. This move aligns with a broader trend of mainland companies seeking to diversify their financing channels.

Regulatory Support and Market Dynamics

The Hong Kong Stock Exchange has adjusted its listing rules to facilitate secondary listings for mainland companies, encouraging firms like CATL and Luxshare to consider Hong Kong as a viable platform for capital raising. Additionally, Chinese regulators are promoting Hong Kong listings to broaden financing avenues and support outbound mergers and acquisitions.​

Cautious Optimism Amid Geopolitical Tensions

Despite the positive momentum, challenges remain. The U.S. administration's "America First Investment Policy" suggests potential increased scrutiny on U.S. capital flowing to China, adding a layer of uncertainty. Moreover, while AI and tech advancements have boosted market sentiment, China's broader economic recovery is still in progress. As George Chan, Global IPO Leader at EY, notes, "At this point in time, all we can see is the good indicators... there could be one single incident happening which could pretty much reverse the trend."​

‍

The confluence of AI breakthroughs, substantial mainland investment, and strategic regulatory adjustments has revitalized Hong Kong's IPO market. As Chinese companies leverage these favorable conditions, the market anticipates continued growth, albeit with a watchful eye on geopolitical developments and economic indicators.

‍