NextFin News, Hong Kong -- There’s no such thing as the hottest—only hotter. At the very start of the new year, Hong Kong’s IPO market got off to a blistering start: in just two months, funds raised from new initial public offerings (IPOs) had already exceeded HK$89.2 billion—10 times the amount over the same period last year.
Looking ahead, more than 480 companies are still queuing up to list on the Hong Kong Stock Exchange (HKEX), forming a truly massive lineup.
This scene was a continuation of the 2025 wave of Hong Kong listings—119 companies rang the bell in succession, sending the HKEX back to the top of the global rankings for IPO fundraising. The profit-making effect of new listings was strong: stories kept surfacing of investors scrambling for cornerstone allocations and of oversubscriptions topping 10,000x. Tales of first-day surges and overnight riches for founders were everywhere.
Yet on one side were IPOs raising hundreds of billions, while on the other sat trillions’ worth of locked-up shares waiting to be unlocked. The more immediate reality is that Hong Kong stocks’ average daily turnover has been hovering around HK$250 billion, yet more than half of listed companies see less than HK$1 million in daily trading value—companies get listed, but nobody buys.
It’s said that after the Lunar New Year holiday, the heads of multiple investment firms handed down a “hard mandate” at their back-to-work meetings—push portfolio companies to pursue Hong Kong IPOs as quickly as possible. “Can the Hong Kong market really handle it?” Investors have begun to worry, quietly but increasingly. Beneath the surface, undercurrents are building.
2025: an Awkward Reality
On July 9, 2025, five companies—Lens Technology, Geek+, Peakhao Technology, Xunzhong Communications, and Dazhong Dental—went public on the same day in the HKEX trading hall. By year-end, Insilico Medicine, Wuyi Shijie, Xunce, Meilian Shares, Woan Robotics, and Linqingxuan put on another “six gongs ringing at once” moment.
As people joked, “HKEX doesn’t have enough gongs.”
With that, HKEX wrapped up its 2025 IPO year in style—raising more than HK$285 billion through IPOs for the full year and reclaiming the global top spot after a four-year gap.
Yet the structural problems beneath the buzz are still glaring: Hong Kong stocks remain a home turf for mega blue chips. A small group of “top students” captures the vast majority of capital, attention, and liquidity; even in a bull market, most listed companies still face brutally intense competition.
In 2025, Hong Kong stocks’ average daily turnover rose to HK$201.5 billion. Compared with 2023 (HK$79.515 billion) and 2024 (HK$102.473 billion), that was already a doubling. But in the context of global markets, Hong Kong’s 2025 average daily turnover was only 10.25% of A-shares (HK$1 trillion) and 4.39% of U.S. stocks (HK$4.59 trillion).
This means that the market’s more than 2,600 Hong Kong-listed stocks are sharing a very shallow pool of water. As a result, in 2025 the top 10% by market cap—268 companies—took 80.33% of the entire market’s trading value. Tencent alone accounted for more than 6% of the market’s average daily turnover, turning liquidity into a winner-takes-all game.
Wind data show that 1,517 Hong Kong-listed companies still had average daily turnover of less than HK$1 million, representing 56.58% of the total,meaning that for every two listed companies, one fell into the awkward predicament of “a quoted price but no market”—shares listed, but no one trading them.
By the end of 2025, 1,820 companies on Hong Kong’s Main Board had market caps below HK$10 billion, accounting for more than three quarters. For these small- and mid-cap companies, the moment the bell is rung may already be the peak.
After an IPO bell-ringing, liquidity can ebb faster than many people imagine.Tracking all 2025 new listings using Choice data shows that most new stocks, after the trading-day-one feast, began to shrink rapidly. Even “Trillion-Dollar CATL” couldn’t escape it.
And for the companies that were already on the fringes, the situation is even more awkward. Some firms whose names rarely show up in the public eye saw their average daily turnover drop to under HK$1 million just a few months after listing; some even went days with zero trading, effectively slipping into a state of “no one cares.”
It’s a scene that leaves people with mixed feelings. And even tougher challenges are beginning to loom.
A Trillion-Dollar Wave
In 2026, Hong Kong stocks are set to face a major test as share lockups expire.
For institutional investors, a surge on the listing day is only “paper wealth.” What LPs truly care about is how much real cash can actually be taken off the table after the lockups end.
According to PUYI International’s estimates, Hong Kong stocks are expected to see about HK$1.6 trillion in market value of restricted shares unlocked in 2026. In six months of the year, the amount unlocked is projected to exceed HK$100 billion. September may be the peak—more than HK$530 billion in restricted shares could be unlocked in that single month, accounting for 32.6% of the full-year total.
Why is the unlocking pressure so intense? One key reason is that in recent years, listed companies have increasingly preferred to issue only a small proportion of new shares, which has further pushed up the share of restricted stock. Among the IPOs in 2025, some companies had soon-to-be-unlocked restricted shares making up more than 90% of their free float.
Because market conditions were sluggish in 2023–2024, the IPO valuation multiples for 2025 deals were pushed down to their lowest level since 2018. That provided a solid valuation cushion for new listings and also gave them greater upside elasticity. In 2025, 72% of new listings closed higher on their first trading day, with an average gain of 37%.
Highly elastic valuations, a small amount of tradable shares, and a massive overhang of restricted shares waiting to be unlocked—multiple factors are hinting at a script of turbulence and volatility. Even mega-cap blue chips like Xiaomi and Kuaishou have seen sharp opening drops on unlocking days.
Fragile liquidity is a magnifier of abnormal price moves. For many companies with post-listing market caps of a few billion Hong Kong dollars—or only a few hundred million—average daily turnover can shrink to below HK$5 million within six months of listing. With so little liquidity, a small amount of selling can trigger a sudden plunge. That’s why in the Hong Kong market, it’s not uncommon to see “flash crashes” on unlocking days, with single-day drops of more than 20% or 30%, or even a halving.
Amid the wave of lockup expiries, liquidity has once again become the decisive factor in whether Hong Kong–listed companies and their shareholders can make it through smoothly.
Stock Connect: Not a Miracle Cure
Only after clearing the two hurdles of listing and lockup expiry does a listed company’s journey in the secondary market truly begin—and in the Hong Kong market, liquidity issues run through almost the entire story.
According to the Hong Kong SFC’s review report on the securities market for the first half of 2025, southbound flows accounted for 23.1% of Hong Kong stock market turnover, with net purchases of HK$731.2 billion during the period. As a result, many companies set inclusion in Stock Connect as their first post-listing goal.
Once included in Stock Connect, a company effectively obtains a ticket to mainland capital: eligible individual and institutional investors on the mainland can buy its shares, trading activity tends to pick up noticeably, and longer-term trading becomes smoother. After a liquidity premium lifts the valuation, it can further trigger passive buying from index funds. With liquidity and market cap improved, subsequent fundraising—such as placements and private issuances—tends to have a higher chance of success and better pricing.
With all these benefits layered on top of each other, getting into Stock Connect is often seen by companies as a “miracle drug” for bringing in fresh capital. In reality, southbound funds are not a universal remedy for a company’s liquidity predicament—this channel into the mainland’s vast capital pool not only comes with a very high entry bar, but even after getting in, keeping eligibility is like sitting an ongoing monthly liquidity exam.
Stock Connect relies heavily on the Hang Seng Composite Index as a key reference for stock selection, and that index in turn uses market capitalization and turnover as core assessment criteria. Institutions estimate that the inclusion threshold will be raised to a market cap of HK$9.0 billion this year, up 26% from 2025.
In addition, Hang Seng Indexes Company has tightened its market-cap assessment standard: instead of using month-end market cap over the past 12 months, it now uses the average market cap across more than 260 trading days over the full year—placing stricter and more granular demands on companies’ market-cap management. For many small- and mid-cap Hong Kong stocks that peak at listing and then see thin trading thereafter, this rule change may make joining Stock Connect even more out of reach.
An even tougher challenge is that the Hang Seng Composite Index conducts a regular review every six months, with liquidity as one of the core evaluation metrics. If a constituent stock fails the liquidity requirements due to shrinking turnover, declining market cap, or similar factors, it will be removed from the index—thereby losing its Stock Connect eligibility as well.
Historical data lays bare how unforgiving this process can be: take the two Stock Connect adjustments in 2025 as an example—48 listed companies were removed in total, including well-known names and category leaders such as Zhixing Technology and October Rice Field. Such adjustments directly cut off the funding channel from mainland investors, making their liquidity constraints even more pronounced.
Past data shows that, on the day a constituent is removed, its share price typically falls by 5%–15%. In the sessions that follow, turnover drops by anywhere from 30% to 80%, market depth shrinks sharply, large orders become hard to execute, and the refinancing function effectively disappears.
That’s why Stock Connect in Hong Kong functions more like a “liquidity amplifier” than a “liquidity creator.” It can add fuel to the fire by bringing more capital to stocks that are already actively traded, but it is far less able to come to the rescue and revive “zombie stocks” that lack trading activity.
“We won’t consider building a position in any stock with average daily turnover below HK$10 million,” said an investor at a secondary-market private fund. Average daily trading value and turnover rate are factors that every secondary-market investment institution’s risk-control framework must take into account, and baseline liquidity is also a prerequisite for active managers to establish positions.
In 2025, 72.77% of listed companies recorded average daily turnover of less than HK$10 million. HK$10 million a day had already become an invisible “liquidity cutoff line” for Hong Kong-listed companies. Once basic liquidity can’t be maintained, a listed company can easily slide into a negative spiral:
the company peaks at listing; its share price drifts lower without end; investors’, executives’, and shareholders’ holdings and options turn into paper wealth, and exit timelines are forced to stretch out; it is removed from the Stock Connect eligible list, losing the “fresh water” of southbound capital; and when it tries to refinance, it runs into roadblocks everywhere as valuations fall again and again. In the end, some companies choose to go private and delist, while others are forcibly struck off after prolonged stagnation.
In 2025, a total of 62 companies left the market. Half were forced out; the other half made an active choice——29 companies decided to exit via privatization because of the market’s low liquidity, share prices that stayed below par for a long time, and thin trading. They had all once enjoyed the spotlight of the IPO bell-ringing moment, only to be gradually forgotten by the market in the days that followed.
Plan for Exit Early
As the market cheered Hong Kong stocks returning to the top globally, companies and investors both needed to stay clear-eyed: an IPO frenzy is not a guarantee of liquidity.
In a rulebook where the strong get stronger and winners take all, the fanfare and spotlight at the bell-ringing do not mean a smooth exit path is already in place. The real test often comes at the critical moment when lock-ups expire and a large volume of shares is released—only if the market is still willing to pay attention and absorb the supply can you tell whether an investment can truly “make it safely to shore.”
So how do you make it to shore? Looking back, the answer seems to have been embedded in the IPO moment itself. Companies and investors should not treat the IPO highlight as the finish line for fundraising, but as the starting point for communicating value to the capital markets. By leveraging the IPO’s built-in buzz to attract investors’ attention—and, more importantly, their willingness to stay with the company for the long haul—you plant the key seeds for future liquidity and a smoother exit.
The celebration always fades, but liquidity is a marathon. Stockpiling energy and building an audience for that marathon at the very moment the gong sounds may matter more than celebrating a brief sprint—and may be the best remedy for an exit.
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