HKEX(HK:00388) Sou Hu Cai Jing·2025-08-04 04:06Core Viewpoint - The Hong Kong Stock Exchange (HKEX) has optimized its IPO regulations to enhance the pricing and allocation mechanisms for new listings, effective from August 4, 2023, aiming to attract more local and international investors [1][3]. IPO Market Optimization - The new rules allow issuers to allocate at least 40% of the initially proposed shares to the book-building portion, down from the previously suggested 50% [3]. - A new mechanism (Mechanism B) has been introduced, allowing issuers to set a public offering allocation between 10% and 60%, while Mechanism A's maximum clawback percentage has been increased from 20% to 35% [3][4]. - The initial public holding requirement has been revised to provide greater flexibility and certainty for issuers, with new initial free float requirements introduced to ensure sufficient tradable shares at listing [3][5]. Market Dynamics - The changes reflect a shift in the investor structure of the Hong Kong market, where institutional investors now account for nearly 90% of trading, compared to less than half two decades ago [4][5]. - The adjustments are expected to enhance the attractiveness of listing in Hong Kong and boost investor confidence in participating in IPOs [3][5]. Impact on IPO Pricing - The new dual-track system (Mechanism A and B) is designed to stabilize the share allocation between institutional and retail investors, ensuring a balanced distribution of shares [5][6]. - The reforms aim to create a more institutionally driven IPO pricing ecosystem, potentially leading to a reshuffling in the brokerage industry, with larger firms gaining an advantage [6][7]. Future Projections - The HKEX is projected to lead global IPO fundraising, with 2025's first half already surpassing the total amount raised in 2024 [8]. - The new regulations are expected to facilitate larger companies in managing their capital more effectively, as they may prefer to issue shares at a later stage rather than during the IPO [9][10].