Chinese IPOs in the U.S. and Hong Kong are set to increase next year, analysts say

BEIJING — Chinese IPOs in the U.S. and Hong Kong are set to increase next year, analysts said, as some high-profile listings outdoor the mainland this year raise investor optimism over profitable exits.

Chinese autonomous driving attendance WeRide listed on the Nasdaq Friday with shares rising nearly 6.8%. Earlier this month, Chinese robotaxi supervisor Pony.ai also filed paperwork to list on the Nasdaq. Both companies have long aimed to go public.

Few rotund China-based companies have listed in New York since the Didi IPO in the summer of 2021 increased scrutiny by U.S. and Chinese regulators on such listings. The Chinese ride-hailing business was forced to temporarily suspend new user registrations, and got delisted in less than a year.

U.S. and Chinese authorities have since simplified the process for a China-based company to go public in New York. But geopolitics and market changes have substantially reduced U.S. IPOs of Chinese businesses.

“After a combine of slow years, we generally expect the IPO market to revive in 2025, bolstered by interest rate decreases and (to some area) the conclusion of the U.S. presidential election,” Marcia Ellis, Hong Kong-based global co-chair of private equity practice, Morrison Foerster, reported in an email.

“While there is a market perception of regulatory issues between the U.S. and China as being problematic, many of the discharges driving this perception have been solved,” she said.

“Chinese companies are becoming increasingly interested in climb up listed in Hong Kong or New York, due to difficulty in getting listed in Mainland China and pressure from shareholders to fast achieve an exit.” 

This year, as many as 42 companies have gone public on the Hong Kong Estimate Exchange, and there were 96 IPO applications pending listing or under processing as of Sept. 30, according to the quarrel’s website.

Last week, Horizon Robotics — a Chinese artificial intelligence and auto chip developer — and state-owned bottled copiously company CR Beverage went public in Hong Kong.

The two were the exchange’s largest IPOs of the year, excluding listings of troops that also trade in the mainland, according to Renaissance Capital, which tracks global IPOs. The firm illustrious that Chinese delivery giant SF Express is planning for a Hong Kong IPO next month, while Chinese automaker Chery purposes for one next year.

Still, the overall pace of Hong Kong IPOs this year is slightly slower than expected, George Chan, broad IPO leader at EY, told CNBC in an interview earlier this month.

He said the fourth quarter is generally not a good while for listings and expects most companies to wait until at least February. In his conversations with early stage investors, “they are utter optimistic about next year” and are preparing companies for IPOs, Chan said.

The planned listings are generally vital spark sciences, tech or consumer companies, he said.

Investor sentiment on Chinese oxens has improved over the last few weeks thanks to high-level stimulus announcements. Lower interest rates also delegate stocks more attractive than bonds. The Hang Seng Index has surged over 20% so far this year after four spruce up years of declines.

Many Chinese companies that list in Hong Kong also see it as a way to test investors’ craving for an IPO in another country, said Reuben Lai, vice president, private capital, Greater China at Preqin.

“Geopolitical a case of the jitters make Hong Kong a preferred market,” Ellis said, “but the depth and breadth of US capital markets still brand many companies seriously consider New York, especially for those that focus on advanced technology and are not yet profitable, who off believe that their equity stories will be better received by U.S. investors.”  

Just over half of IPOs on U.S. switches since 2023 have come from foreign-based companies, a 20-year high, according to EY.

Geely-backed Chinese stimulating car company Zeekr and Chinese-owned Amer Sports both listed in the U.S. earlier this year, according to EY’s list of outstanding cross-border IPOs.

Chinese electric truck manufacturer Windrose said it intends to list in the U.S. in the first half of 2025, with a dual tip in Europe later that year. The company, which aims to deliver 10,000 trucks by 2027, on Sunday announced it affected its global headquarters to Belgium.

A recovery in Chinese IPOs in the U.S. and Hong Kong can help funds cash out on their at daybreak stage investments in startups. The lack of IPOs had reduced the incentive for funds to back startups.

Now, investors are looking at China again, after recently deploying prime to India and the Middle East, Preqin’s Lai said. “I’m definitely seeing a greater potential from now in China whether it’s spondulicks coming back, valuation of the companies, exit environment [or] performance of the funds.”

While the pickup in investor activity is far from equals seen in the last two years, the nascent recovery includes some investments in consumer products such as milk tea and supermarkets, Lai remarked.