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2023 IPO Outlook

IPOs in Hong Kong and Mainland China are set to rebound in 2023, as the re-emergence of the Asia-Pacific region’s premier markets attracts global investment with increasing momentum fueled by favorable macroeconomic factors, including the US Federal Reserve’s softening stance on interest rate hikes and the end of China’s technology industry ‘crackdown’. The cumulative daily turnover for the Shenzen and Shanghai stock exchanges exceeded 1 trillion RMB in April, with healthcare and telecommunications stocks performing highest.


Meanwhile, Hong Kong is predicted to regain its position as one of the world’s leading IPO markets, maintaining the pace of new listings and revenue growth shown during the second half of 2022 (which helped the city remain in the top three) and first quarter of 2023. The insurance giant FWD Group has resumed its IPO plans, which were previously placed on hold amid market volatility last year. Hong Kong Exchanges and Clearing Limited has announced a new platform for new specialist technology enterprises to raise capital and pursue listings on the Hong Kong Stock Exchange.


Chapter 18C of the HKEX Listing Rules, which aims to attract ‘Specialist Technology Companies’ to Hong Kong, came into effect on March 31, 2023, after consultations with market stakeholders.


The categories under the ‘Specialist Technology Company’ classification include:

  1. Advanced hardware (i.e robotics, electric/autonomous vehicles, quantum computing)
  2. Advanced materials (i.e synthetic biological materials, nanomaterials, composite materials)
  3. New energy and environmental protection (renewable energy) and
  4. New food and agriculture technologies. The listing rules further categorize specialist enterprises by ‘Commercial Companies’, which have implemented a business model to commercialize products, and ‘Pre Commercial Companies’, which trade on the strength of their R&D and IP.


As such, the renewed growth of Hong Kong’s IPO markets are set to be defined by both new startups and major multinational enterprises driving growth across a diverse range of new sectors in addition to Information Technology, which has been the key focus around the world for over a decade.


HKEX also opened an office in New York in December 2022 in order to develop stronger partnerships with multinational enterprises based in the United States. As with its offices in Shanghai, Beijing and Singapore, HKEX provides on-ground support for US-based companies and investors to access new markets across Asia through Hong Kong’s connectivity with Mainland China.


IPO listings in Mainland China are rebounding with vigorous momentum, having already raised five times as much capital as US markets during the first half of the year. With European markets also trading at a relatively diminished pace, Asia currently leads worldwide IPOs. China’s renewed growth in 2023, initially driven by the nationwide reopening at the beginning of the year, is bolstered by reforms that have streamlined listings rules in Shanghai and Shenzen.


According to the chair of the China Securities Regulatory Commission (CSRC) chair Yi Huiman, the changes in Mainland China’s listing regime are a “comprehensive and fundamental change”. Listed companies will also have the autonomy to set their prices based on market demand under the new registration based system, once their listing documents and valuations are verified and validated by the exchange. The revenue and profit thresholds required for eligibility to trade on the Shanghai and Shenzen exchanges have been eased in order to enable companies from emerging new industries to list. Analysts anticipate strong growth in domestic A-Shares as a result.


Previously, the CSRC was directly involved in reviewing listing applications and had the authority to determine share prices. China’s new listing rules are part of a broader strategy to enable higher levels of investment and bring domestic stock markets in line with international standards. The new reforms have accelerated the pace of the IPO process and shares in the first initial public offerings under the new listing rules, which took effect in April, jumped by 96% on average. Under the new rules, IPO shares can trade without limits during the first five days, after which they will be subject to a 20% upside and downside limit.


China’s stock markets have now opened the floodgates to a new wave of investment that will drive growth at an expansive scale and accelerated pace. With a rebound in economic activity, combined with reforms geared to market needs in both jurisdictions, the outlook for Hong Kong and Mainland China IPOs shows great promise. With new opportunities driven by new industries, more extensive international connectivity between regional financial systems and growing global interest in Asian markets, 2023 looks to be a landmark year.


We specialize in pre-IPO preparation and consultation in relation to audit and assurance, corporate governance and internal control advisory. If you have any enquiries regarding the Initial Public Offering process in Hong Kong or would like to learn more about cross border corporate structuring, please feel free to get in touch anytime- we can provide a free initial consultation at any of our offices.