Hong Kong IPO stocks frequently break below issue price at year-end, with December's opening day decline marking highest drop this year

ZC Asia has learned that the Hong Kong IPO market has recently experienced a marked deterioration in performance, contrasting sharply with its robust trajectory throughout most of the year. On 22 December, four newly listed stocks collectively breached their issue prices on their debut trading day. At market close, BenQ Hospital (02581.HK), Impression Dahongpao (02695.HK), Huazhong Bio-B (02396.HK), and Nanhua Futures (02691.HK) closed down 49.46%, 35.28%, 29.32%, and 24.17% respectively. Among these, Mingji Hospital's decline marked the steepest first-day drop for a Hong Kong IPO since 2025.

Statistics indicate that among the 17 new listings in December 2025, nine breached their issue price on debut, exceeding half the cohort. Extending the observation period to November and December to date reveals five and ten new listings respectively fell below their issue price on their first trading day. Notably, December's debut-day breach rate reached 50%, markedly higher than the year's overall 29% average.

This trend contrasts sharply with the broader performance of new listings this year. As of the statistical date, 76 out of 102 new listings in 2025 saw share prices rise or remain stable, accounting for nearly 75% of the total. Among these, 16 stocks recorded cumulative gains exceeding 100%. Furthermore, 44 companies saw their share prices increase within the first 20 trading days post-listing.

Market analysts suggest this cooling reflects multiple shifts in Hong Kong's equity environment. Despite the Federal Reserve's rate cuts, liquidity in the Hong Kong market has not been effectively boosted, with overall market performance remaining sluggish.

Zhang Xia, Chief Strategist at China Merchants Securities, highlighted two primary internal factors contributing to this liquidity weakness: firstly, following the implementation of new mainland regulations for public funds, their holdings in Hong Kong stocks exceed benchmark levels, potentially triggering net selling; secondly, the Hong Kong market faces significant capital demands, with the concentrated IPO issuance impacting both liquidity and market sentiment. Currently, over 300 companies remain in the IPO pipeline.

Regarding issuance pace, year-end IPOs in Hong Kong have accelerated markedly. During the first week of December, only six companies passed listing hearings, with four commencing share offerings. This increased to nine companies simultaneously launching offerings in the second week. From 14 to 20 December, the number of companies passing hearings and commencing offerings reached 12 and 15 respectively. Concurrently, subscription multiples for new listings have shown a stepwise decline, while allotment rates have risen, placing investors in a situation where ‘securing an allotment is easy, but profiting is difficult’.

New listings also exhibited extreme divergence in performance. Alongside stocks that plunged significantly below their issue price, there were cases like Fruit Technology (02655.HK) and Nobican (02635.HK), whose share prices doubled on their first trading day. Hong Kong stock analysts suggest that the impact of differing issuance mechanisms is becoming apparent. While ‘Mechanism B’ enhances the first-day performance of certain stocks, it may also increase the risk of price breaks for companies with inflated valuations and lukewarm institutional subscription, due to the absence of a reallocation mechanism.

Regulators have also taken note. It is understood that in early December, the Hong Kong Securities and Futures Commission and the Hong Kong Stock Exchange jointly wrote to IPO sponsors, expressing concern over the recent decline in quality and certain non-compliant practices observed in new listing applications.

The Hong Kong IPO market currently exhibits signs of overheating, with the queue of applicants steadily growing. As of 17 December, 298 companies were in the hearing stage, including 28 new additions in just over half of December alone – surpassing the 18 additions recorded during the same period in November. Market concerns persist that this concentrated issuance may divert capital from the secondary market, exacerbating liquidity pressures and creating a negative feedback loop.

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