On one side is the wave of listings, and on the other side is the high rate of initial price declines. Hong Kong stock IPOs are experiencing a "double whammy" of hot listings and sharp declines.

Ask AI · Why has the Hong Kong stock IPO “underpricing” rate surged sharply in 2026?

Caixin Finance, March 31 (Reporter Wang Chen) Just this past Monday, the bell rang repeatedly inside the Hong Kong Exchanges and Clearing’s listing hall. Four companies rang the bell for listing on the same day. D-Gen Biotech opened up more than 120%, while Jushijiao’s (Extreme Vision) gains also once exceeded 100%. Hantian Chengcheng’s market value stood above HK$40 billion. The atmosphere on site was so heated that market participants were once again left marveling, “The bells aren’t even enough anymore.”

Meanwhile, outside the HKEX doors, nearly 500 companies are still lining up to wait for their IPO. This listing boom that began at the start of 2026 is, at an astonishing pace, resetting multiple records in the Hong Kong stock market. In the first quarter alone, more than 30 companies have successfully listed, and total fund-raising has crossed the HK$100 billion mark in just 79 days.

However, behind the prosperity, a set of data is giving people pause for thought.

As of March 30, 2026’s Hong Kong market had welcomed 38 newly listed IPO stocks in total. Of these, 17 have fallen below their issue price, with the underpricing rate reaching as high as 44.74%. In 2025, the IPO underpricing rate for Hong Kong stocks was only 27.6%.

Fund flows also show extreme polarization. On the one hand, hard-tech, AI, and new energy companies are highly sought after. After star companies Zhipu and MiniMax listed, their market values rose several times. On the other hand, some companies in traditional industries, or those that received insufficient subscriptions, feel an icy chill. “Tongrentang Medical Care,” which has a 356-year history and was supposed to list on Monday, was forced to postpone its IPO ahead of listing due to insufficient subscriptions.

The upcoming wave of lock-up expirations is also worrying. Predictions suggest that in 2026, about HK$1.6 trillion worth of restricted shares in Hong Kong stocks will be due for release, and only in September alone, it may exceed HK$530 billion.

The underpricing rate rises to 44.74%

What stands in sharp contrast to the double rise in IPO counts and fund-raising scale is the steep jump in the underpricing rate of new shares. How should one interpret a 44.74% underpricing rate?

CITIC Securities’ research shows that in 2025, the IPO underpricing rate for Hong Kong stocks was only 27.6%, the lowest level since 2018. Both the median and the mean of first-day returns were at near eight-year highs, and the market once saw a “sure profit from subscribing to new issues” trend. CICC Securities’ research shows that in 2025, the average opening return rate for Hong Kong stock IPOs was about 40%, and the underpricing rate fell to a historical low of 28%, significantly below the average level from 2018 to today.

However, entering 2026—and even as early as last November—this trend is reversing. With an underpricing rate of 44.74%, up 17 percentage points from the full-year level of 2025, investment risk for new shares has been significantly raised.

Looking at the performance of 38 new shares, the degree of divergence is staggering. Among the top ten gainers, software services, semiconductors, and biopharmaceuticals dominate outright. AI companies such as Zhipu, MiniMax, and Extreme Vision lead the way in gains. Semiconductor names such as Zhaoyi Innovation and Tianshuzhixin also saw gains of more than 50%.

In the underpricing camp, companies in traditional manufacturing, food and beverage, non-ferrous metals, and hardware equipment are clustered together. After listing, Youle Sai Shared’s return rate plunged 64.55%. Companies such as Hongxing Cold Chain, Zhuozheng Medical, and Aixin Yuanzhi all fell by more than 30%. Even industry leaders such as Muyuan Co., Ltd. and Dongpeng Beverage were unable to escape the fate of underpricing.

On a more granular level, underpricing companies show three major shared characteristics: first, industry fundamentals are relatively weak—areas such as traditional consumption, manufacturing, and logistics lack room for growth imagination, making it difficult to win favor from capital; second, valuations and fundamentals are disconnected—some companies’ issue price earnings multiples are significantly higher than the industry average, and after listing valuations rapidly revert toward rational levels; third, market caps are relatively small and liquidity is lacking—small-cap stocks have weak capacity to absorb sell pressure, and even a small amount of selling can trigger a sharp drop in share prices.

What is worth noting is that, in 2025, reforms to the IPO pricing mechanism in Hong Kong had once effectively suppressed the underpricing rate. Of the 28 new shares that listed after the reforms through to the end of October, only 2 experienced underpricing, resulting in an underpricing rate as low as 7.14%. But after November, changes in the market environment combined with a surge in supply, and the underpricing rate quickly rebounded to 42.10%.

Why is the Hong Kong stock IPO market “ice and fire” at the same time?

Behind the high underpricing rate is the combined result of a complex macro environment and the market’s micro-level mechanisms.

From the market environment perspective, in the first quarter of 2026, tighter U.S. dollar liquidity became an important external factor affecting the Hong Kong stock market. Multiple brokerage research views believe that the end of the Federal Reserve’s rate-cut cycle and rising expectations of rate hikes have strengthened the dollar, prompting international capital to flow out of the Hong Kong stock market and putting overall liquidity under pressure.

At the same time, since March, the Hang Seng Index and the Hang Seng Tech Index have been trading lower amid volatility. Investors’ risk appetite has fallen, and their tolerance for new-share valuations has noticeably decreased.

From the supply side, the sharp increase in the number of IPOs and fund-raising scale directly caused market capital to be severely diverted. By the end of March, 34 companies had listed during the year, and total fund-raising exceeded HK$100 billion, representing a year-on-year increase of more than 460%. With more than 500 companies queued up, supply has taken on a “spike” pattern. In this context, multiple IPOs at the scale of tens of billions were issued in a concentrated manner, creating a “pulse-style pumping” effect. Large amounts of funds were locked in the primary market, and the secondary market’s ability to absorb capital was clearly insufficient.

From the issuance perspective, an issue price that is too high and an overextension of expectations have become important triggers for underpricing. For some new shares, their issue price earnings multiples were significantly above the industry average. After listing, valuations quickly reverted, and share prices fell accordingly. Meanwhile, excessive oversubscription diluted investment returns, and the larger share base suppressed the share price’s elasticity. Some projects pursued scale and were overly optimistic on pricing, disregarding the market’s real ability to absorb the supply. As for the price-support mechanism, some new shares lacked support from cornerstone investors. After listing, there was insufficient buy-side support; selling pressure was released directly, making it difficult for the share price to stabilize.

From the company side, uneven industry conditions and divergence in fundamentals further exacerbate the risk of underpricing. Hard-tech sectors such as AI are being strongly pursued by the market, while new shares in traditional manufacturing and consumption, due to weaker growth potential and fiercer competition, have become the worst-hit areas for underpricing.

Where is the Hong Kong stock IPO market heading?

Also worth attention is that the Hong Kong Securities and Futures Commission has recently continued to tighten regulation of sponsors and strengthened requirements for due diligence. This trend toward stricter regulation also makes sponsors and prospective listed companies more cautious in pricing and disclosure, indirectly increasing the market’s sensitivity to the quality of new shares. But this is not a traffic jam for Hong Kong IPOs—high-quality projects will still attract market capital.

As the impact of reforms to the Hong Kong IPO pricing mechanism continues to deepen, market pricing efficiency is expected to improve. Although issues such as a relatively small float and liquidity polarization will persist, as funds concentrate on high-quality hard-tech companies, the Hong Kong market’s technological characteristics and value-driven “base color” will become even clearer.

For prospective listed companies, the Hong Kong stock market is no longer a financing venue for “anyone who comes will be accepted,” but a contest of “survival of the fittest.” The deeper change is happening at the level of investor psychology. The high underpricing rate of new shares in Hong Kong is breaking investors’ mindset that “subscribing to new issues is always profitable,” and capital is shifting from blindly chasing hype to focusing on fundamentals, looking at valuations, and choosing the right sectors.

(Caixin Finance reporter Wang Chen)