Hong Kong IPO boom at risk as cornerstone backers get cold feet, sources say

Exuberance among cornerstone investors in Hong Kong’s booming initial public offering (IPO) market seems to be fading, forcing some issuers that had hoped to list this month to postpone their offerings.

With more than 60 per cent of new listings in the third quarter now trading below their issue prices, cornerstone investors – who typically receive guaranteed allocations in exchange for holding shares for six months – are reconsidering whether to subscribe to coming deals, according to people familiar with the matter.

At least one IPO originally planned for October had to be delayed until next month at the earliest after some institutional investors pulled out of verbal agreements to be cornerstone backers, they said.

“Bankers are now scrambling to find replacements,” said the people, who asked not to be identified because they were not authorised to speak publicly.

The slowdown follows a weak showing among the city’s largest debuts this year. Out of the nine Hong Kong listings that raised more than US$1 billion in the first three quarters, six are now trading in the red.

For example, Chinese energy-drink maker Eastroc Beverage has plummeted more than 60 per cent from its issue price since its debut in February.

“Even if they don’t exit entirely, some say they want to reduce their investment size or go back through their internal investment committee,” the people added. “Issuers with high valuations and unclear earnings are especially affected.”

This post-IPO weakness had severely undermined long-term investor confidence, particularly amid ongoing market volatility, said Edward Au Chung-hing, southern region managing partner at accounting firm Deloitte China.

Funds raised through Hong Kong IPOs reached US$48.4 billion in the first nine months of 2026, marking the highest level for this period since records began in 1980, according to LSEG Data & Analytics.

However, as of September 30, out of 31 companies that listed in the city during the third quarter, 20 – more than 60 per cent – fell below their offer prices.

Among them, electronic test equipment manufacturer Rigol Technologies, medical device maker Medcaptain Medical Technology, Chinese autonomous driving firm Momenta and Beijing Tong Ren Tang Healthcare Investment have all seen their share prices halved from their offer prices.

Blockbuster IPOs launched during the quarter also performed poorly. Only Innolight’s shares remain above its issue price, while Shein and Luxshare are currently trading 27 per cent and 20 per cent below their issue prices, respectively.

Sovereign wealth funds and private equity firms such as GIC, Hillhouse and Temasek actively took part in Hong Kong’s IPO market, but most have recorded paper losses.

Temasek subscribed to a total of more than US$500 million worth of shares across Chaozhou Chaozhou Three-Circle, Eastroc Beverage, Luxshare, and Innolight, but three of these investments are now sitting on losses.

Over the past few years, the number of international cornerstone investors in Hong Kong IPOs has steadily recovered, reaching a recent high this year. Beyond traditional Asian investors, long-term funds from the Middle East, Europe, North America and the Asia-Pacific region have continued to increase their participation, said Bonnie Chan Yiting, CEO of bourse operator Hong Kong Exchanges and Clearing (HKEX), last month.

Among the top 10 largest IPOs this year, seven had cornerstone allocations account for nearly 50 per cent of their total fundraising – mostly for companies listed in the first half of the year.

In contrast, Shein, which listed in the third quarter, had a cornerstone allocation of only 22 per cent. For smaller listings like RoboTechnik Intelligent Technology and Shenzhen Longsys Electronics, cornerstone participation stood at 35 per cent and 18 per cent, respectively.

“Investors will become more selective and cautious, and investment amounts may decrease, but this will not deter companies’ ambition to list in Hong Kong,” Au said.