Provided by: Chinese Fund News 【Introduction】Top private equity firms such as Hillhouse, Gaoyi, and Jinglin have participated in the Hong Kong stock IPOs. The Hong Kong stock market remains vibrant, with new IPOs showing impressive performance. This year, the Hong Kong IPOs have set a new record with a subscription rate of 7,558 times, and the average first-day performance of new stocks has seen a significant rise of 38%. Recently, the trend has even led to cases of stock prices doubling. Hillhouse, Gaoyi, and Jinglin have recently joined as cornerstone investors in several prominent Hong Kong IPOs. Regarding Hong Kong IPOs, our reporter interviewed multiple private equity firms, noting that pricing is largely market-driven, with firms considering new stock valuations and value before deciding to participate. They express optimism concerning the Hong Kong market's potential for sustained recovery, supported by factors such as clarity in AI industry trends, improved liquidity, and low valuations, favoring sectors like technology, healthcare, and high-dividend stocks. Record Subscription Rate of 7,558 Times Average First-Day Increase of 38% for Hong Kong IPOs The Hong Kong market has remained active and has outperformed major global markets in 2025. As of October 17, the Hang Seng Index has seen a year-to-date increase of 48.10%, and the Hang Seng Tech Index has risen by 28.92%, surpassing the S&P 500, Nasdaq, and indices from leading European countries. The IPO market in Hong Kong has also been notably vigorous this year. In the first three quarters of 2025, there have been 68 IPOs, raising a total of approximately HKD 186.5 billion, including large offerings from companies like CATL, ZIJIN GOLD INTL, Hengrui Medicine, and Sanhua Intelligent Control. Furthermore, this year, the debut price drop rate for Hong Kong IPOs is only 22%, the lowest in nine years, with an impressive average first-day increase of 38%. Since September 9, all 14 IPOs launched have not seen a price drop, with ZIJIN GOLD INTL achieving a subscription rate of 7,558.4 times, setting a new record. Kaiser's Fund states that the vibrant performance of the Hong Kong market is primarily due to its attractive valuation, which is one of the lowest globally. The influx of southern funds has also played a crucial role, as over HKD 1 trillion has been net purchased this year, greatly improving liquidity and supporting the issuance of new stocks. “We are optimistic about the mid-to-long term performance of the Hong Kong market. The issuance pace for IPOs has accelerated this year, yielding substantial gains that validate market confidence in the future of Hong Kong stocks. Market liquidity has noticeably improved, revealing significant investment opportunities. We believe this trend will continue,” expressed Kantek Capital. Zhang Yanjun, Fund Manager and Research Director at Jinyi Fund, remarked that although China’s macroeconomy has been slowing and facing a deflationary cycle, the Hong Kong market has bucked the trend in 2025. However, the rise in the Hong Kong market is not broad-based but rather driven by the high-growth trends in the AI sector, as evidenced by the significantly higher profit growth rates of components in the Hang Seng Tech Index compared to market averages, coupled with global liquidity easing, ultimately resulting in a collective valuation recovery for Hong Kong stocks. “Jinyu Investment consistently adheres to the core philosophy of long-term value investing. When considering new stocks, we maintain appropriate focus, while strictly following a value investing framework that emphasizes fundamental analysis, including business models, industry prospects, financial conditions, and management teams, rather than initial market trading heat or price increases,” stated Cui Jian, Fund Manager at Jinyu Investment. Hillhouse, Gaoyi, and Jinglin are cornerstone investors in Hong Kong's new stocks. Private equity firms emphasize fundamental analysis and valuation criteria for IPOs. Since late September, there have been no IPO price drops in Hong Kong, with stock prices frequently doubling. On October 10, Zhida Technology surged 192% on its debut, while ZIJIN GOLD INTL experienced an impressive first-day increase of 68%. Following its debut, ZIJIN GOLD INTL continued to rise. With an issue price of HKD 71.59 per share, ZIJIN GOLD INTL was listed on September 30, and its first-day gain was 68.46%, closing at HKD 120.6. Over the next four trading days, it continued to rise, hitting a high of HKD 158.9, an increase of 121.96% from the issue price. ZIJIN GOLD INTL is not a small-cap stock; as of October 17, its closing price is HKD 147.8, more than doubling from its issue price, with a total market capitalization reaching HKD 395.6 billion. Hillhouse’s HHLRA, Gaoyi, and Jinglin participated as cornerstone investors, subscribing HKD 1.364 billion, HKD 623 million, and HKD 366 million, respectively, reaping substantial rewards thus far. Regarding participation in IPOs, multiple private equity firms interviewed stated that the pricing mechanism for Hong Kong IPOs is relatively market-based, with firms focusing strongly on fundamental analysis, primarily industry positioning and profit certainty; versus valuation assessments, which require horizontal comparisons and consideration of safety margins. One private equity firm involved in Hong Kong IPOs noted that they primarily act as cornerstone investors, albeit not excessively. “The focus remains on the underlying assets, ensuring compliance with our stringent standards for deep value investing, only participating under those conditions; additionally, we look for mid-to-long-term growth potential in firms and, barring any significant fundamental issues, we are likely to hold investments long-term. Participation in IPOs is simply a different means of engagement.” “We have increased our investment in Hong Kong stocks significantly this year and have actively participated in IPOs. We tend to engage in international placements through anchoring and will consider cornerstone investments for projects with substantial long-term value,” Kantek Capital remarked, stating that project selection begins early with extensive preliminary research and meticulous screening to select better projects for further in-depth studies and active participation in roadshows and valuations to continually optimize project selection and improve IPO strategies for favorable returns. For companies with average quality and investment opportunities, they advise avoiding or exercising caution in participation to minimize losses from potential first-day price drops. Some private equity firms also pointed out the need for market-based valuation recognition due to the highly market-oriented nature of Hong Kong IPOs. As the IPO system in Hong Kong operates under a very market-oriented registration system, the arbitrage opportunities between the primary and secondary markets are minimal. If a prospective IPO firm sees strong demand for its offering, it may increase its issue price until there’s no profitable space left. As more companies list at high prices amidst stable demand, the prices will have to adjust downwards to reach an equilibrium. Private equity firms see potential for continued gains in Hong Kong stocks, particularly in technology, healthcare, and high-dividend sectors. “Though the recent rebounds in Hong Kong stocks have been significant, the valuations of major indices remain relatively low compared to other global markets, signifying room for increases. Furthermore, the overall profitability of Hong Kong stocks has markedly improved, and the global competitiveness of Chinese companies has significantly risen,” Kaiser Fund noted. Regarding the future of the Hong Kong market, Zhang Yanjun believes that even with short-term challenges to rapid recovery in the macroeconomy, the prospects for Hong Kong stocks remain promising. The core reason for this potential is the thriving mid-to-long-term growth trends in the AI sector. The market's driving forces are shifting from investments in AI hardware to the large-scale implementation of AI applications, providing robust and sustainable foundational support for the new economy. Moreover, the Federal Reserve's interest rate cuts have directly lowered financing costs in the Hong Kong market, redirecting international capital towards emerging markets. In addition, while U.S.-China relations are still in a phase of contention, there are signs of easing, leading to a normalization in market reactions. “Current valuation levels in Hong Kong, though improved, remain significantly below those in U.S. and A-shares, particularly as the growth in profits among technological stocks and valuation recoveries create a virtuous cycle.” Kantek Capital also expresses a medium-to-long-term optimistic view of the Hong Kong stock and IPO markets. Comparatively, Hong Kong remains undervalued within global capital markets. In the context of China's economic transition and upgrade, structural opportunities become prominent. Furthermore, the inflow of domestic funds and global capital reallocating towards Chinese assets hint at further improvement in market liquidity. “These factors lay a solid foundation for the continued performance of Hong Kong stocks. We will keep a close watch on investment opportunities in Hong Kong and IPO participation moving forward,” said Kantek Capital. Regarding promising investment directions, Kaiser Fund identifies that the reassessment of the value of Chinese assets should commence with Hong Kong stocks, emphasizing the development potential and investment opportunities of leading Hong Kong stocks. Leading companies in Hong Kong tend to have better liquidity and higher potential returns; they possess greater capabilities to operate globally and develop comprehensive after-sales networks. Moreover, given that leading companies have more data and resource inputs, they are likely to benefit significantly in the AI era, potentially experiencing larger valuation escalations in the future. A major private equity firm disclosed that since the start of this year, net inflows of southern funds into the Hong Kong market have exceeded HKD 1.2 trillion. Supported by profit recoveries and improved liquidity, the market is expected to sustain structural trends from the fourth quarter of this year into the next, with key focus areas still being technology, healthcare, and raw materials, while high-dividend assets provide a safety margin. The Hong Kong IPO market benefits from pricing mechanism reforms and a wave of tech listings, showing substantial profit potential, though caution is warranted due to liquidity risks and valuation bubbles surrounding small-cap companies.