Economic Observer reporter Lao Yingying

The IPO was announced to be delayed shortly after its completion. On November 4th, Hemei Pharma-B (00054. HK) announced that due to the current market situation, it has decided to delay the global offering and listing and refund the application for shares. According to the issuance plan, Meimei Pharmaceutical will start its IPO on October 30th and end on November 4th. The original plan was to go public for trading on November 9th.

In fact, since October, Shouxihu Culture and Tourism (06157. HK) and Weiyi Intelligent Manufacturing (03275. HK) have announced the postponement of their Hong Kong stock listing plans after the IPO.

In addition to Hemei Pharma-B, on October 30th, six companies including Hongxinyu (02681. HK), Denglin Technology-P (09917. HK), Xinde Semiconductor (07672. HK), New Lotus (02206. HK), Yuanxin Energy Storage (09621. HK), and Yiwei Technology (02065. HK) began their IPOs on the same day, but the public market subscription was not ideal.

Mr. Yang, a senior Hong Kong stock IPO investor, is not very interested in the IPO of this batch of new stocks. On the afternoon of November 3rd, he noticed that the subscription multiples for these new shares through margin trading were still insufficient, meaning that the individual investors who subscribed to the new shares through securities financing channels had not yet reached the fundraising scale for the public offering. Additionally, the deadline for subscription for five of the new shares was November 6th. It is expected that only one or two new stocks in this batch will have a relatively good final margin subscription multiple situation, and the rest are very likely to remain cold to the end, "Mr. Yang told reporters.

The sharp contrast between the ups and downs of the market. In the first half of this year, the primary market of Hong Kong stocks was very hot, with multiple companies listing on the same day and the Hong Kong Stock Exchange experiencing a shortage of funds. Semiconductors, large models, biopharmaceuticals, and "A+H" projects were collectively listed, and many new shares were oversubscribed by thousands of times in public offerings, leading to a high enthusiasm for new capital. Subsequently, the secondary market continued to weaken, and since August, the Hang Seng Index has been declining for three consecutive months, leading to a rapid reduction in the heat of the primary market. The subscription multiples for public offerings in September and October have significantly decreased, with an increasing number of cases announcing delayed listings, termination of listings in Hong Kong, and first day IPOs.

New stock issuance and subscription 'cold'

Mr. Yang told the Economic Observer reporter that the recent performance of Hong Kong's new stocks has not been optimistic. Three new stocks were listed in October and all closed down on the first day. Although 7 new stocks were launched simultaneously this time, it does not mean that each one has strong market carrying capacity.

According to Live Report, a deep data platform, from July to October, 20 out of 34 new stocks in Hong Kong went bankrupt in the dark market, and 17 went bankrupt on the first day, with a first day IPO rate of 50%.

Under the wave of new stock issuance, the subscription heat has rapidly declined simultaneously. In the first half of the year, some Hong Kong stocks were able to achieve hundreds or even thousands of times oversubscription through public offerings of new shares. Since September, the effective subscription multiples and margin subscription multiples of multiple new shares listed have fallen back to the single digit range. For example, Live Report data shows that Transsion Holdings (02636. HK) subscribed 4.46 times for its public offering and 2.55 times for its international placement; Tongcheng New Materials (09607. HK) received 3.39 times subscription for its public offering and 2.75 times subscription for its international placement; Robotech (03757. HK) has subscribed 8.65 times for its public offering and 5.97 times for its international placement.

A-share giant Dongshan Precision (002384. SZ), with a market value of billions, was also affected by the market downturn. The company listed on the Hong Kong stock market on October 28th, and this H-share issuance has 20 cornerstone investors, with subscription shares accounting for 50% of the global offering shares and supported by the green shoe mechanism. However, after the IPO, the margin subscription in the public market was only 0.39 times.

Mr. Yang said that he usually pays attention to the subscription multiple of the new stock margin one day before the subscription deadline. If the subscription multiple reaches hundreds or even thousands of times, he will participate in the new subscription. Moreover, with the introduction of new stock allocation regulations by the Hong Kong Stock Exchange in August 2025, many new stocks this year have pre fixed their public offering shares without setting up a callback mechanism. In his view, this means that if the market sentiment is weak and there is insufficient subscription for the public offering margin, there will be a situation where the first hand signing rate is 100%. That is to say, for this type of new stock, all investors participating in public subscription will receive chips, and there is a common demand for "cashing out" and leaving the market. As a result, the market lacks buying orders to take over, and the pressure on stock prices will be relatively high.

He also stated that the seven new stocks mentioned above cover popular tracks such as memory, innovative cancer small molecule drugs, intelligent mobile robots, and domestic GPUs (graphics processors), but four of them have not set up a green shoe mechanism. At the time of the stock price breaking, there is no obligation for the main body to bear the responsibility of stabilizing the market price and undertaking the selling pressure. The function of the green shoe mechanism is that the lead underwriter can use the excess funds from the over allotment to buy stocks in the secondary market within 30 days after listing, in order to hedge against concentrated selling pressure and support stock prices. If there is no protection from the green shoe mechanism, when all the investors who have won the lottery sell and cash in on the first day of listing, the probability and magnitude of the stock price breaking will be further amplified.

Li Nan is the head of a Hong Kong based investment agency headquartered in South Korea. He told the Economic Observer reporter that part of his institution's main business is investing in mainland companies listed in Hong Kong, and will flexibly focus on cornerstone and anchor investments in the primary market or IPO stage according to market cycles, mainly involving emerging hot fields such as semiconductors and large models.

Li Nan stated that the recent low subscription heat for some Hong Kong stocks' new stock issuances may be due to the previous intensive supply of IPO issuances, where a large amount of funds and market attention were absorbed by top large targets, resulting in insufficient capacity for small and medium-sized new stocks to undertake; On the other hand, the pricing and valuation of new stocks are relatively high. For projects listed after the third quarter, from the perspective of investor fund security, the issuance price determined by the previous valuation level in the primary market needs to be discounted before it can be transmitted to the secondary market to gain market recognition.

In addition, Li Nan said that the weakening of retail investors' motivation to invest in new stocks may also be related to the synchronous interest rate hike in Hong Kong after the Federal Reserve raised interest rates in September, which led to an increase in Hong Kong dollar interest rates. This is because the interest rate hike has pushed up the overall financing cost of the market, and investors who rely on margin leverage to participate in new stock subscriptions may selectively participate in Hong Kong stock IPOs.

Suddenly 'stepping on the brake' before going public

Under the cooling down of subscription, multiple new stocks stepped on the brakes before going public. On October 25th, Weiyi Intelligent Manufacturing (03275. HK) announced that after considering multiple factors, the company has decided to delay its global offering and plans to list on the main board of the Hong Kong Stock Exchange. Weiyi Intelligent Manufacturing previously published its prospectus on October 20th, with the original plan to price on October 26th and go public on October 28th. The announcement states that "international underwriting agreements related to international offerings will not be entered into, therefore Hong Kong underwriting agreements related to Hong Kong public offerings will not become unconditional.

According to data from TradeGo (a Hong Kong fintech brokerage platform), during the IPO period, Weiyi Zhizao received approximately 32 times the amount of public margin subscriptions, with only one cornerstone investor introduced and a subscription amount of HKD 15.7 million, accounting for 2.11% of the global offering of shares.

On October 20th, with only three days left until its listing, Shouxihu Cultural Tourism also announced a temporary suspension of its Hong Kong listing process. The company explained that after considering multiple factors, including current market conditions, it has decided to postpone the global offering and plan to list on the main board of the Hong Kong Stock Exchange. Previously, companies such as Tongrentang Medical Care, Yongkang Holdings, and Sifang Jingchuang in the Hong Kong stock market have chosen to delay or withdraw their listing after the completion of the IPO.

In Li Nan's view, the recent cooling trend in the Hong Kong IPO market is also normal. He believes that the Hong Kong IPO market exhibits significant cyclical characteristics, with fluctuations in temperature and temperature, which is a relatively normal market performance. The performance of IPO projects is constrained by multiple factors, including industry rotation, domestic and international market trends, market sentiment, and the diversion of funds from new stocks during the same period, in addition to the company's fundamentals and performance expectations for one or two years after listing. In addition, as the end of the year approaches, institutions also have a tendency to cash in profits and shrink their allocation, coupled with the market's divergence towards the artificial intelligence sector, which is partially reflected in stock prices. Multiple factors continue to disrupt the market.

In addition, several A-share companies or their subsidiaries have recently announced the termination of their listing in Hong Kong. On October 13th and 14th, GoerTek (002241. SZ) and Dongcheng Pharmaceutical (002675. SZ) respectively announced the termination of the spin off of their subsidiaries and their listing on the Hong Kong Stock Exchange. Both companies stated in their announcements that the termination was a decision based on a comprehensive consideration of changes in the external environment and the development plans of their subsidiaries.

On October 26th and 29th, Blue Focus (300058. SZ) and Xinwangda (300207. SZ) also announced the termination of H-share issuance and listing on the main board of the Hong Kong Stock Exchange. According to the announcement, both companies stated that this decision is based on a comprehensive consideration of the market environment and their own development plans.

Regarding this, Wang Hongying, the director of the China (Hong Kong) Financial Derivatives Investment Research Institute, also believed in an interview with the Economic Observer that there is a common problem of high issuance valuations among listed companies in the third quarter, and the stability and continuity of their business operations have been questioned by the market. In this context, there are certain differences between issuers and investors: issuers are generally unwilling to lower their valuations for IPOs, and some companies even choose to suspend or withdraw their IPO applications, further exacerbating the cooling trend in the primary market of Hong Kong stocks.

Wang Hongying believes that there is a high probability that the Federal Reserve will further raise interest rates in December. From a short-term trend perspective, due to the continued high interest rate environment of the Federal Reserve and the continuous outflow of market funds, the situation of Hong Kong stock IPOs cooling down is highly likely to continue until the end of 2026, and it is even possible that it may further continue until the first quarter of 2027.

Wang Hongying also stated that from the perspective of the pace of interest rate hikes by the Federal Reserve, the negative impact of previous rate hikes on market expectations is relatively greater. It is difficult to determine whether to continue raising interest rates in the future, as the core depends on changes in US inflation levels. However, even if the Federal Reserve raises interest rates once or twice next year, its impact on the Hong Kong stock market will be further reduced, and the subsequent trend of the Hong Kong stock market will still be mainly determined by the fundamentals of listed companies themselves.

(Author Lao Yingying)