Chinese IPOs in the U.S. and Hong Kong are set to increase next year, analysts say

BEIJING — Chinese language IPOs within the U.S. and Hong Kong are set to extend subsequent yr, analysts stated, as some high-profile listings exterior the mainland this yr elevate investor optimism over worthwhile exits.

Chinese language autonomous driving firm WeRide listed on the Nasdaq Friday with shares rising practically 6.8%. Earlier this month, Chinese language robotaxi operator Pony.ai additionally filed paperwork to record on the Nasdaq. Each firms have lengthy aimed to go public.

Few giant China-based firms have listed in New York for the reason that Didi IPO in the summertime of 2021 elevated scrutiny by U.S. and Chinese language regulators on such listings. The Chinese language ride-hailing firm was pressured to quickly droop new consumer registrations, and bought delisted in lower than a yr.

U.S. and Chinese language authorities have since clarified the method for a China-based firm to go public in New York. However geopolitics and market modifications have considerably diminished U.S. IPOs of Chinese language companies.

“After a few sluggish years, we usually count on the IPO market to revive in 2025, bolstered by rate of interest decreases and (to some extent) the conclusion of the U.S. presidential election,” Marcia Ellis, Hong Kong-based world co-chair of personal fairness observe, Morrison Foerster, stated in an e-mail.

“Whereas there’s a market notion of regulatory points between the U.S. and China as being problematic, most of the points driving this notion have been solved,” she stated.

“Chinese language firms have gotten more and more desirous about getting listed in Hong Kong or New York, as a consequence of problem in getting listed in Mainland China and strain from shareholders to shortly obtain an exit.” 

This yr, as many as 42 firms have gone public on the Hong Kong Inventory Trade, and there have been 96 IPO purposes pending itemizing or underneath processing as of Sept. 30, in keeping with the change’s web site.

Final week, Horizon Robotics — a Chinese language synthetic intelligence and auto chip developer — and state-owned bottled water firm CR Beverage went public in Hong Kong.

The 2 have been the change’s largest IPOs of the yr, excluding listings of firms that additionally commerce within the mainland, in keeping with Renaissance Capital, which tracks world IPOs. The agency famous that Chinese language supply large SF Specific is planning for a Hong Kong IPO subsequent month, whereas Chinese language automaker Chery goals for one subsequent yr.

Nonetheless, the general tempo of Hong Kong IPOs this yr is barely slower than anticipated, George Chan, world IPO chief at EY, advised CNBC in an interview earlier this month.

He stated the fourth quarter is usually not a very good interval for listings and expects most firms to attend till at the least February. In his conversations with early stage traders, “they’re very optimistic about subsequent yr” and are making ready firms for IPOs, Chan stated.

The deliberate listings are usually life sciences, tech or shopper firms, he stated.

Investor sentiment on Chinese language shares has improved over the previous couple of weeks due to high-level stimulus bulletins. Decrease rates of interest additionally make shares extra engaging than bonds. The Cling Seng Index has surged over 20% to date this yr after 4 straight years of declines.

Many Chinese language firms that record in Hong Kong additionally see it as a method to take a look at traders’ urge for food for an IPO overseas, stated Reuben Lai, vice chairman, personal capital, Larger China at Preqin.

“Geopolitical tensions make Hong Kong a most popular market,” Ellis stated, “however the depth and breadth of US capital markets nonetheless make many firms critically think about New York, particularly for these that concentrate on superior expertise and will not be but worthwhile, who typically imagine that their fairness tales might be higher acquired by U.S. traders.”  

Simply over half of IPOs on U.S. exchanges since 2023 have come from foreign-based firms, a 20-year excessive, in keeping with EY.

Geely-backed Chinese language electrical automotive firm Zeekr and Chinese language-owned Amer Sports activities each listed within the U.S. earlier this yr, in keeping with EY’s record of main cross-border IPOs.

Chinese language electrical truck producer Windrose stated it intends to record within the U.S. within the first half of 2025, with a twin itemizing in Europe later that yr. The corporate, which goals to ship 10,000 vehicles by 2027, on Sunday introduced it moved its world headquarters to Belgium.

A restoration in Chinese language IPOs within the U.S. and Hong Kong might help funds money out on their early stage investments in startups. The shortage of IPOs had diminished the motivation for funds to again startups.

Now, traders are China once more, after just lately deploying capital to India and the Center East, Preqin’s Lai stated. “I am undoubtedly seeing a larger potential from now in China whether or not it is cash coming again, valuation of the businesses, exit surroundings [or] efficiency of the funds.”

Whereas the pickup in investor exercise is way from ranges seen within the final two years, the nascent restoration consists of some investments in shopper merchandise comparable to milk tea and supermarkets, Lai stated.