Hong Kong's IPO boom is developing a performance problem

Hong Kong’s stock exchange ranked first worldwide in IPO funds raised last year, surpassing New York and Nasdaq, according to KPMG, with momentum continuing into early 2026. Over 600 companies await listing, but performance has weakened: half of 179 IPOs since January 2025 have fallen in value over three months, contrasting with gains in global IPO indices. For mainland Chinese investors using the Stock Connect program, the drop has been sharper. Of 33 Hong Kong-listed stocks added to Connect on March 9, over half more than doubled in price before inclusion, but eight—including AI startup Deepexi—fell by 10% or more afterward. Deepexi alone dropped 51% by June 3. Beijing’s state-backed *Securities Times* highlighted concerns over volatile IPO rallies and subsequent crashes. Analysts note that investors often shift capital to cheaper mainland A shares after Connect inclusion, as seen with Hong Kong’s H shares. Ding Wenjie of China Asset Management said some funds exploit Connect inclusion for short-term gains. Goldman Sachs initially forecast $60 billion in Hong Kong IPOs for 2026, nearly double 2025’s $36 billion, but recently downgraded H shares in favor of mainland A shares for AI hardware exposure. Benjamin Cavender of China Market Research Group attributed the pressure to low fees, weaker fundraising, and competition, emphasizing short-term performance challenges. The Hong Kong Exchange (HKEX) attributed price swings to broader market factors. Upcoming tests include Knowledge Atlas Technology, behind AI model Zhipu, set to trade in Shanghai via Connect on June 10, while MiniMax may join later in the summer. Both companies listed in Hong Kong in January.