(Yicai) May 29 -- Hong Kong’s capital markets are showing signs of recovery, driven by stock revaluations and major listings such as that of Contemporary Amperex Technology, which are drawing foreign investors back to the global financial hub.

Last year was a bull market for Hong Kong consumer stocks, but this year, technology stocks are beginning to take the lead, David Lau, co-head of China investment banking at JPMorgan Chase, said in an exclusive interview with Yicai. Internet companies are undergoing revaluation, and the consumption boom is continuing, he added.

Even the primary market is rebounding. So far this year, Hong Kong IPOs have raised around HKD60 billion (USD7.7 billion), according to Financial Secretary Paul Chan Mo-po. Earlier this year, PricewaterhouseCoopers forecasted that total annual proceeds could reach HKD130 billion (USD16.6 billion), potentially placing Hong Kong among the world’s top three IPO markets.

Several notable IPOs have already taken place. For example, battery giant CATL raised USD4.6 billion last week in the world’s largest listing this year. The IPO drew strong international interest, with the international tranche accounting for 92.5 percent of total shares. Cornerstone investors included the Kuwait Investment Authority (a sovereign wealth fund) and UBS Asset Management, Yicai learned from investment bankers.

This follows a challenging period for the special administrative region. In the nearly two and a half years leading up to mid-December 2023, the Hang Seng Index plunged more than 40 percent. At the same time, annual IPO proceeds fell nearly 90 percent, from HKD330 billion in 2021 to just HKD45 billion in 2023.

Revaluations and New Debuts

Several factors are behind the recent resurgence, according to Lau. Liquidity in Hong Kong’s stock market has improved significantly this year, thanks to the beginning of the US Federal Reserve’s interest rate cut cycle and the steady inflow of southbound funds.

Valuations are also bouncing back. A year ago, the price-to-earnings ratio of Hong Kong’s consumer sector stocks was at a historic low. Now, the artificial intelligence boom and recent policy support are drawing investors back, Lau noted.

Reforms by both the Hong Kong Stock Exchange and the China Securities Regulatory Commission are further boosting investor confidence. The HKEX has strengthened its listing rules, while the mainland regulator is encouraging high-quality A-share companies to use Hong Kong as a platform for international fundraising.

Additionally, renewed concerns since April over the potential delisting of Chinese concept stocks from US exchanges may make Hong Kong a more attractive venue for future listings.

Morgan Stanley estimates that 27 Chinese concept stocks are currently eligible for dual or secondary listings in Hong Kong. The SAR accounts for about 30 percent of the trading liquidity of these stocks, positioning it as a key bridge between China's mainland and international markets.

Editor: Emmi Laine