Hong Kong's equity market is undergoing its most significant regulatory shift in over 20 years, as the Hong Kong Stock Exchange (HKEX) implements a new IPO pricing and allocation framework. The reforms, effective August 4, aim to improve price discovery, expand issuer flexibility, and align market practices with global standards.

The change comes at a time of exceptional fundraising momentum. In the first seven months of 2025, Hong Kong raised HK$128.6 billion (US$16.5 billion) from 51 IPOs, according to LiveReport data — a more than sixfold increase year-on-year and nearly matching the combined proceeds from 2023 and 2024. This performance secures Hong Kong the top spot in global IPO fundraising so far this year.

Investor engagement has been striking: over 80% of listings featured cornerstone investors, committing HK$51.8 billion — more than 40% of the total funds raised. Retail enthusiasm has also been strong, with nearly four million IPO applications submitted; 65% of newly listed stocks ended their first trading day higher, and nine have doubled in value since debut.

The revised framework reflects conclusions from HKEX's recent consultation and introduces several key changes:

• At least 40% of shares in each IPO must be allocated to institutional investors in the bookbuilding tranche, down from the originally proposed 50%.

• Public subscription tranches see higher potential allocations: under Mechanism A, the clawback cap increases from a proposed 20% to 35%; under Mechanism B, the maximum rises from 50% to 60%.

• For A+H issuers — companies listed both in mainland China’s A-share market and in Hong Kong — the initial free float threshold is reduced to 5% of total A+H shares, compared with the originally proposed 10% of H-shares.

• A new tiered public float requirement based on market capitalization provides clearer guidance to listing applicants.

Katherine Ng, Head of Listing at HKEX, said the changes are intended to keep Hong Kong “globally competitive and fit for purpose,” highlighting the market’s evolution into a more diverse venue for issuers and investors worldwide.

The revised framework reflects conclusions from HKEX's recent consultation and introduces several key changes:

• At least 40% of shares in each IPO must be allocated to institutional investors in the bookbuilding tranche, down from the originally proposed 50%.

• Public subscription tranches see higher potential allocations: under Mechanism A, the clawback cap increases from a proposed 20% to 35%; under Mechanism B, the maximum rises from 50% to 60%.

• For A+H issuers — companies listed both in mainland China’s A-share market and in Hong Kong — the initial free float threshold is reduced to 5% of total A+H shares, compared with the originally proposed 10% of H-shares.

• A new tiered public float requirement based on market capitalization provides clearer guidance to listing applicants.

Katherine Ng, Head of Listing at HKEX, said the changes are intended to keep Hong Kong “globally competitive and fit for purpose,” highlighting the market's evolution into a more diverse venue for issuers and investors worldwide.

The reforms create distinct advantages for larger companies, especially those with strong institutional backing. The reduced free float threshold offers flexibility in managing capital structure and listing timelines. Smaller issuers, however, may face tighter listing conditions due to higher float requirements, making precise share allocation strategies more critical.

A+H issuers stand to benefit most from the adjustments. The past year has seen a rise in mainland consumer brands and technology firms pursuing dual listings in Hong Kong, attracted by its global investor base and reputation for international fundraising. Policy measures, such as a dedicated IPO application channel for technology firms launched in May, have further supported this trend.

According to Yang Delong, Chief Economist at First Seafront Fund, the dual-listing pathway not only diversifies funding sources but also enhances brand visibility and supports international expansion strategies.