Hong Kong, India fuel blockbuster year for Asia fundraising

Not long ago, Hong Kong’s share-sale market was a symbol of China’s slowdown: Deal books were thin, investor sentiment was sour and bankers were fleeing the industry. This year, the script has flipped.

Share sales nearly quadrupled to more than $73 billion through initial public offerings, placements and block trades. For the first time since 2013, that made Hong Kong the No. 1 fundraising spot in Asia, ranking just behind the US globally. The city has been at the front of a dealmaking boom across the continent that included a record year for IPOs in India, and strong markets in mainland China and Japan.

In Hong Kong, Chinese companies fueled the frenzy with gargantuan deals to power their global expansion plans. Battery maker Contemporary Amperex Technology Co. raised $5.3 billion in the world’s second-largest listing in May. Electric-vehicle maker BYD Co. and EV-to-smartphones giant Xiaomi Corp. also raised more than $5 billion each in share placements. Deals even powered ahead as the US rolled out tariffs, and some faced pushback from US politicians.

“This year has exceeded expectations,” said James Wang, head of equity capital markets for Asia excluding Japan at Goldman Sachs Group Inc. “We expect volumes to continue rising, albeit at a more measured pace.”

The upswing has been broad-based across Asia. Four of the world’s five largest share-sale venues are in the continent, with India, mainland China and Japan trailing Hong Kong. For the first time, four Asian markets were among the top five in the world for share sales, according to data compiled by Bloomberg.

The Hong Kong IPO pipeline looks healthy as well, with about 300 companies waiting to list their shares, according to the Hong Kong stock exchange. In a sign of the feverish pace of dealmaking, Hong Kong Exchanges & Clearing Ltd. and the market watchdog had to scold banks over filing shoddy applications. The torrent of deals is also making some investors cautious.

“Investor discipline on valuation and fundamentals is likely to be higher after such a strong year,” said Zhe Song, a senior investment specialist at BNP Paribas Asset Management in Hong Kong. Song said his funds managed by his team would selectively participate in high-quality deals related to innovation, manufacturing of heavy machinery for use in robotics, and new consumer trends.

The flood of share sales is a stark contrast to a drought that started in 2022, when borrowing costs rose, tensions between the US and China intensified and Beijing cracked down on its homegrown technology giants.

This year, the Hong Kong market became a beneficiary of China’s artificial-intelligence ambitions, advances in biotechnology, efforts by Beijing to boost domestic demand, and gains in global prices of gold and aluminum. All the while, share sales had been relatively muted in mainland China, where proceeds had outpaced those in the city in past years.

“Sectors that are still in line with China’s key strategies will be more active to get on an IPO,” said Shi Qi, deputy head of capital markets at China International Capital Corp. These include companies related to technology, advanced manufacturing and robotics, Shi said.

Heavyweight listing candidates expected to come to the Hong Kong market next year include those whose shares aren’t trading elsewhere. That would be a fresh crop of deals on top of second listings of China-traded firms that dominated this year’s pipeline. The biggest potential IPOs include Chinese-owned Swiss agricultural technology company Syngenta Group and CK Hutchison Holdings Ltd.’s health and beauty retailer A.S. Watson Group, people familiar with the matter have said. China’s AI darlings are also expected to list their shares.

“If you look at the pipeline, it’s huge,” said Peihao Huang, head of Asia-Pacific equity capital markets at JPMorgan Chase & Co. “The test will be how the market is going to take up that supply, at what valuation and what sort of pace because it hasn’t been this busy for the last couple of years.“

Hong Kong listings have generated a weighted average return of almost 50% this year from their debut prices, outperforming the Hang Seng Index. But how many of the 300 deals come to fruition next year — and how well they do — will hinge on the performance of the broader stock market.

While the Hang Seng Index has gained 29.5% this year, on track for its best performance since 2017, signs of weakness emerged in the fourth quarter. Chinese stocks in Hong Kong in particular have recently retreated due to lingering concerns over tech valuations and as fiscal stimulus some investors have wagered on hasn’t materialized.

“Investors are likely to be a bit more price-cautious and selective in terms of participation,” said Rob Chan, Citigroup Inc.’s head of Asia equity capital markets syndicate. Chan said he still expects a busy 2026, with lockup expiries from this year’s listings potentially fueling block trades by existing shareholders, additional share sales by companies and the issuance of bonds that can convert into stocks.

Asia’s Dominance

Elsewhere in Asia, India has also been carrying a chunk of the region’s deals.

“Today, we have a lot more billion-dollar-plus deals than ever before,” Manan Lahoty, head of capital markets at law firm Cyril Amarchand Mangaldas, said of the India market. “This year itself we would end up filing or launching more than all the past years put together.”

In India, IPOs hit a second consecutive year of record with more than $20 billion in proceeds, thanks to an expanding pool of money from domestic mutual funds and retail investors. Existing shareholders have also rushed to sell their holdings through block trades.

Juggernauts lining up to list in Mumbai next year include Reliance Industries Ltd.’s telecommunications unit Jio Platforms Ltd., which may be the country’s biggest-ever IPO. International companies may also continue tapping India’s rising valuations to list subsidiaries, said Peter Guenthardt, head of Asia-Pacific global corporate and investment banking at Bank of America Corp.

“Every multinational with a sizable India business is one way or the other considering whether to take that piece public,” Guenthardt said.

Lofty Valuations

Still, it’s those very valuations that have raised questions about the longevity of the IPO boom. Roughly half of the 300-plus companies that listed shares in India this year are trading below their debut prices, Bloomberg-compiled data show. The MSCI India Index is up more than 7% this year, underperforming the regional benchmark.

“If we saw a meaningful fallback in the market and a contraction, I think that might spook some investors,” said James Thom, senior investment director of Asian equities at Aberdeen Investments. Thom said he recently avoided participating in the IPO of e-commerce platform Meesho Ltd. due to its valuation and because the company hasn’t turned a profit. The company’s shares ended their first day of trading up more than 50%.

Still, Thom said he expects earnings growth among Indian companies to buttress stock-market performance next year. “Maybe not all focus will be on the IPO market,” he added.

The euphoria is also apparent in mainland China, which in 2022 trumped the US as the world’s biggest share-sale market until it underwent a self-imposed tightening starting the following year. Retail investors have been clamoring over IPOs of Chinese chipmakers — which align with Beijing’s goal of technological self-sufficiency. Shares of industry leader Moore Threads Technology Co. surged more than 400% in their recent Shanghai debut.

All that, of course, may yet come undone by developments beyond the control of dealmakers, such as geopolitics.

“Whether next year will really exceed the amount of fundraising for IPOs this year is still a bit hard to tell,” John Lee, co-head of Asia country coverage at UBS Group AG, said of the Hong Kong market. “At least for the first half of the year, overall issuance volume will still be at least on par if not higher than this year.”