In the early spring of February, the spring is expected to be cold, and the intermediaries in the capital market have already felt the warmth of mainland enterprises going public in Hong Kong.

Two weeks after the resumption of work during the Spring Festival in 2025, Yueyang lawyer, who works in a branch of the "Red Circle" (i.e., China's top law firm), has already "flown to" four cities to approach companies planning to list in Hong Kong. Among them, two A-share listed companies plan to launch their listings in Hong Kong, namely "A+H" listing projects.

He introduced his team's success stories to the client, and analyzed the specific situation of the target company, the Hong Kong stock market and the key points of listing supervision, with a view to winning the project smoothly.

Yue Yang was responsible for the firm's Hong Kong IPO (initial public offering) in southwest China. In the past two years, because the Hong Kong stock IPO market has been deserted, the pressure of layoffs has been "knocking" on his heart. The recent busyness reminds him of six years ago, when there was a boom in mainland companies listing in Hong Kong. At present, seeing that there are more and more cases that can be contacted in his hands, he guesses that 2025 will be a "big year for Hong Kong stocks".

An investment banker from a leading brokerage firm had a similar idea. In the first half of 2024, he is still distressed because he has no projects to do, for fear of being transferred or laid off; Starting from the fourth quarter of 2024, there will be some "A+H" projects that his team can operate together with the brokerage's Hong Kong team, without having to write a prospectus (the prospectus for Hong Kong stocks is written by a lawyer), and the bonus of the project is about the same as that of the A-share IPO, and he is beginning to look forward to more "A+H" projects.

According to incomplete statistics from the Economic Observer, since 2025, 21 A-share listed companies have promoted their listing in Hong Kong, including CATL (300750. SZ), Haitian Flavor Industry (603288. SH), Hengrui Pharmaceutical (600276. SH) and so on.

Under the influence of factors such as policy support, changes in the market environment and corporate demand, Hong Kong stocks with relatively relaxed listing conditions, mature and international are attracting more and more A-share companies. Chen Ge, co-head of the global investment banking department of UBS Securities, said that "A first and then H" is the main force for new listings in the Hong Kong stock market recently. According to the projects being processed by UBS and the latest market information, it is expected that nearly 30 A-share companies will be listed in Hong Kong in 2025.

The need to "go to sea" and financing

Recently, listing in Hong Kong is intensively appearing in the announcements of A-share listed companies.

Jewalt (688141. SH) and Sany Heavy Industry (600031.SH) disclosed on February 17 and 18 respectively that they planned to issue shares (H shares) overseas and list them on the Hong Kong Stock Exchange. On February 18, Chifeng Gold (600988. SH) passed the listing hearing of the Hong Kong Stock Exchange, becoming the third gold stock listed on "A+H".

Why are these A-share listed companies keen to list in Hong Kong?

Yue Yang found that in the cases he had approached in the past, most companies chose to list in Hong Kong first because they could not meet the threshold for A-share listing. However, since the second half of 2024, there have been more and more cases of A-share listed companies willing to list in Hong Kong. In his view, broadening financing channels and internationalisation strategies are the main reasons why these companies choose to dual-list in Hong Kong.

In order to accelerate the company's internationalization strategy and overseas business layout, enhance the company's overseas financing capabilities, and further improve the company's capital strength and comprehensive competitiveness, according to the company's overall development strategy and operational needs, the company plans to issue shares (H shares) overseas and list on the Stock Exchange of Hong Kong Limited.

Sany Heavy Industry said in the announcement that the listing in Hong Kong is to further promote the globalization strategy, strengthen the docking with overseas capital markets, and further enhance the transparency and standardization of corporate governance.

CNGR (300919.SZ), which announced on February 11 that it plans to issue shares (H shares) overseas and be listed on the Hong Kong Stock Exchange, said that the launch of H-share listing will help build an international capital operation platform, help the company's global industrial layout continue to upgrade, and accelerate the construction of a domestic and international dual circulation pattern.

CATL said in its prospectus submitted on February 11 that the funds raised by its Hong Kong stock listing will be mainly used for overseas capacity expansion, international business expansion and overseas working capital replenishment, providing financial support for the company's long-term internationalization strategy.

The above-mentioned brokerage investment bankers said that in recent years, while the A-share IPO has been tightened, the refinancing and bond issuance markets have also been quite cold, and the funds raised in 2024 will decline significantly, and enterprises have a hard need to broaden financing channels, so even if Hong Kong stocks have the problem of low valuation and high maintenance costs, there are still companies that want to double list in Hong Kong.

Wind data shows that in 2024, the total refinancing of A-shares will be about 223.120 billion yuan, a year-on-year decrease of 70.03%, and the total refinancing for the whole year will hit a new low since 2007; In the bond issuance market, the amount of convertible bonds raised in 2024 will be 48.278 billion yuan, a year-on-year decrease of 65.66%.

Wind data shows that among the 21 A-share companies that have promoted their listing in Hong Kong since 2025, 10 companies will account for more than 30% of their total revenue in 2023 301308. SZ), Goertek (002241. SZ) accounted for more than 50% of the total revenue.

In 2024, the dual listing of two leading mainland companies in the Hong Kong market has attracted much attention. Midea Group (000333. SZ) and S.F. Holding (002352.SZ) successfully landed on the Hong Kong Stock Exchange in September and late November 2024, raising RMB26.969 billion and RMB6.171 billion respectively.

After the listing in Hong Kong, how has the overseas business development of the two companies been?

According to public information, since the second half of 2024, Midea Group's overseas business has been reported frequently, including but not limited to the start of mass production of a new factory in Brazil and the establishment of a Saudi branch.

According to the December express logistics business operation briefing released by SF Holdings, benefiting from the stable international shipping freight and cargo volume, as well as the increase in demand for international air transportation, the revenue of international freight and agency business grew steadily year-on-year, while the company continued to deepen business integration and continuously explore the supply chain and international market, and the company's supply chain and international business revenue was 6.801 billion yuan, a year-on-year increase of 24.63%.

A lawyer in northern China said that by listing on the Hong Kong stock market, companies can reach out to international investors and enhance brand awareness and market influence.

Chen Ge said that as Chinese products become more popular with overseas consumers and enterprises, even if the enterprises themselves are not short of money, having an overseas financing platform can facilitate the development of overseas business and overseas investment and mergers and acquisitions.

Will the market buy it?

A number of intermediaries said that when they approached A-share companies that planned to list in Hong Kong, they found that the main concerns of these companies were cost issues and whether the shares "could be sold".

Why is "whether you can go public" instead of the primary concern? Yue Yang explained that Hong Kong stock listings are more flexible than A-share listings, and the review efficiency is higher. Generally speaking, A-share companies have transparent data and standardized governance, and there is basically no need for rectification, and the preparatory process for listing in Hong Kong will be relatively simple.

"Even if the company that submits the statement has an operating loss in the most recent reporting period, it will not play a decisive role [in whether it can be listed]. The Hong Kong Stock Exchange mainly looks at the ability to continue operations and compliance issues, such as whether the business has relevant licenses and qualifications, and whether it has 'stepped on mines' in some prohibited areas. Yue Yang said that the Hong Kong Stock Exchange will ask separate questions about the lawyer team, brokerage team, and accountant team of the company to be listed, and as long as the "answer" result is recognized, the company with poor performance can also pass the hearing.

According to the above-mentioned lawyer, the cost of IPO in Hong Kong mainly includes the service fees of various intermediaries, the fees of the Hong Kong Stock Exchange and various miscellaneous fees, etc., and the fees paid to professional intermediaries account for the largest proportion, and additional maintenance fees such as accounting firms, law firms, and financial compliance consultants need to be spent every year. "Money is more expensive here." A senior financial source in Hong Kong said that the maintenance cost of Hong Kong stocks is high, and the IPO valuation is lower than that of A-shares, so most of the previous "A+H" cases were listed on Hong Kong stocks before A-share IPOs. For some small A-share companies, "A+H" is not easy.

As of the close of trading on February 20, the average price ratio of AH shares of 151 A+H dual-listed companies was 1.4 times. This means that, on average, the Hong Kong share price of an A-share company is about 71.43% of the A-share share price. However, this stock price ratio varies from company to company, such as China Merchants Bank (600036. SH), BYD (002594. SZ), Midea Group's AH share price is basically flat, and the AH share price ratio of some companies is even as high as about 4 times.

According to the above-mentioned senior Hong Kong financier, the investor structure and stock pricing model determine the characteristics of Hong Kong stock valuation. If the company to be listed directly prices the Hong Kong stock market according to the valuation of A-shares, it is objectively difficult to raise funds; If they are just looking for related parties and helpers to buy the stock, then the stock will most likely fall below the issue price on the first day of listing.

Some investors are worried that listing on Hong Kong stocks with low valuations will affect the A-share stock prices of listed companies in some industries.

Shen Meng, director of Chanson Capital, believes that the Hong Kong market is a part of the international capital market, and international capital will seek targets with higher security and better profitability in different markets. If the valuation of Hong Kong stocks is higher than that of U.S. stocks, capital will invest directly in U.S. stocks. However, because the stocks traded in A-shares and Hong Kong stocks are not interconnected, there is no room for arbitrage, and in addition to emotional factors, the low valuation of Hong Kong stocks will not suppress the stock price of A-shares.

Li Zhenguo, vice chairman of UBS's global investment banking department and co-head of Asian corporate clients, said that in terms of industries, investors in Hong Kong stocks are looking for companies with relatively strong cash flow and stable growth. In 2025, companies related to consumer goods, industrials, and technology may be more active in the Hong Kong stock market.

According to the Economic Observer's first-level industry combing of Shenwan's industry name (2021), among the 21 A-share companies that have promoted their listing in Hong Kong this year, 6 belong to the electronics industry, 4 belong to the power equipment industry, and 3 belong to the biomedical industry.

The listing boom in Hong Kong will continue

Chen Ge predicts that nearly 30 A-share companies are expected to IPO in Hong Kong in 2025. In his view, there are three main factors that attract A-share companies to continue to go to Hong Kong: first, at the regulatory level, the mainland government and regulators are more open, the approval time for A-share companies to go to Hong Kong continues to be accelerated, and the threshold is lowered; Second, the spread between A and H shares has narrowed, even if the valuation of Hong Kong stocks is not as high as before, but A shares still have room to fall; The third is international capital allocation, Hong Kong, China is a global capital circulation market, and investors will pay more attention when there are good projects.

At the policy level, the regulators of the two places have repeatedly signaled their support.

On 19 April 2024, the China Securities Regulatory Commission (CSRC) announced five capital market cooperation measures for Hong Kong, one of which is to "support the listing of leading mainland enterprises in Hong Kong". The China Securities Regulatory Commission (CSRC) said it will deepen cooperation with Hong Kong and take five measures to further expand and optimize the Stock Connect mechanism, help Hong Kong consolidate and enhance its status as an international financial center, and jointly promote the coordinated development of the capital markets of the two places.

On 23 August 2024, the Hong Kong Stock Exchange lowered the market capitalisation threshold for Specialist Technology Companies to be listed. In October of the same year, the Hong Kong Securities and Futures Commission (SFC) and the Hong Kong Stock Exchange (HKEX) issued a joint statement announcing a fast-track approval process for eligible A-share companies with an expected market capitalisation of at least HK$10 billion to list in Hong Kong.

In November 2024, Wu Qing, chairman of the China Securities Regulatory Commission, said that it would further maintain the smooth flow of overseas financing channels, further improve the efficiency of overseas listing filing, actively support qualified domestic enterprises to list overseas, and make better use of the two markets and two resources.

On 19 December 2024, HKEX published a consultation paper on proposed enhancements to the IPO market pricing and open market (the "Consultation Paper"). On February 7, 2025, the Chief Executive Officer of the Hong Kong Stock Exchange, Chen Yiting, issued a document stating that the current open market rules and pricing mechanism of the Hong Kong Stock Exchange can no longer meet market demand, are out of touch with international market practices, and even hinder market development. She said that the consultation paper is divided into two main categories, one is about the open market and the other is about the pricing mechanism. Through this reform, HKEX hopes to enhance the international competitiveness of Hong Kong's IPO market.

Jones

Lang LaSalle's senior director of valuation advisory services, Chen Zhuoying, said that the reform aims to reduce the compliance burden of issuers, improve market liquidity and align with international standards. The lowering of the "A+H" issuer threshold will attract more mainland technology and consumer goods companies to list in Hong Kong, and the previous "fast-track approval" policy is expected to enhance the diversity and depth of the Hong Kong market.

The

cost problem that plagues enterprises and the "whether the stock can be sold" may continue to improve in the implementation of the above series of policies.

Yue Yang was on a business trip and continued to revise the presentation when he returned to the hotel. Next, he needs to take this presentation with the partner broker to visit the customer. The last time he met a lot of peers competing to show himself in a company in Guangzhou, he felt that the industry was very "volume", and even this "volume" had been reflected in the quotation. He said that some intermediaries do not hesitate to offer historically low prices to compete for projects of leading enterprises, in order to obtain a "decent" case and increase market share, and these are precisely the concerns of enterprises when choosing intermediaries.

However, what is different at the moment is that Yue Yang can use DeepSeek (a large domestic model launched by AI company Deep Quest) to write an outline, and then use Kimi intelligent assistant (a large domestic model launched by the dark side of the artificial intelligence company Moon) to directly generate a presentation.

For the business development in the coming period, Yue Yang thought that although there are more projects being talked about at present, it is necessary to observe from the real launch of the project to the successful issuance to see if the number of successful projects will increase in the second half of the year.

(At the request of the interviewee, Yue Yang is a pseudonym in the article).