Hong Kong is rolling out sweeping capital market reforms, including improved IPO pricing mechanisms and a post-listing over-the-counter market. This is aimed at building on the city’s success in becoming one of the world’s leading IPO destinations in the first half of 2025 by number of listings and funds raised.

The proposed updates, according to a summary published by lawyers Latham & Watkins, emerged from a HKEX consultation that ran through the second half of 2024. The resulting reforms are expected to take effect soon, but as it is, HKEX’s revised IPO pricing is already yielding positive results.

The new system empowers institutional and high-net-worth investors during the price discovery phase, leading to improved listing outcomes and post-listing stability, according to Andrew Lam, managing director of assurance at BDO Hong Kong.

“These professional investors can assist in arriving at an equitable and competitive IPO pricing,” Lam explained. “They tend to be more medium- and long-term investors, which will enhance the post-IPO secondary market’s trading and development.”

Hong Kong’s average daily stock turnover for the first five months of the year surged from HK$110.2 billion (US$14 billion) in 2024 to HK$242.3 billion this year. “This abundance of hot money and liquidity provides a favourable environment for IPOs,” said Lam.

“There are good quality stocks which have been listed and are in the pipeline for IPO. These are sizeable market leaders and household names. [They attract] large institutional and high-net-worth investors’ interest, and vice versa.”