IPO-HK

Beginner’s Guide to Hong Kong IPO Investing for Mainland Investors

Investing in Hong Kong IPOs (initial public offerings) can be exciting and potentially profitable, especially for retail investors from mainland China. This guide will explain the entire IPO subscription (allotment) process in Hong Kong in an easy-to-understand way. We’ll cover how Hong Kong’s system works (versus IPOs in mainland China or the U.S.), what accounts and funds you need, how to subscribe step-by-step, the difference between cash and margin financing, how to read IPO prospectuses, tips on evaluating an IPO’s worth, grey market trading, common risks and strategies, the IPO timeline, useful tools, cross-border money and tax considerations, and whether IPO investing is a good long-term strategy. Finally, we include case studies of three recent IPOs – Mixue Group, Guming Holdings, and Top Education – to illustrate lessons learned.

1. What Is IPO Subscription in Hong Kong (and How Is It Different)?

In Hong Kong, “IPO subscription” refers to the process where investors apply for shares of a company going public before it starts trading on the stock exchangeitiger.com. This is often called “抽新股” (drawing new shares) in Chinese, because if an IPO is popular, investors essentially enter a lottery for the limited shares. Hong Kong IPOs are typically split into two portionsitiger.com:

• International Offering (≈90%) – The bulk of shares are allocated to institutional and high-net-worth investors (including cornerstone investors who commit early and usually have a 6-month lock-up)itiger.com.

• Hong Kong Public Offering (≈10%) – A portion is set aside for retail investors (like you), which is the part you can subscribe to. If the retail demand is very high, a clawback mechanism increases the retail portion up to 50% of the total sharesitiger.com, ensuring individuals have a chance to participate.

This system differs from Mainland China’s A-share IPOs and U.S. IPOs in several key ways:

• Mainland China (A-shares): Mainland IPOs also use a lottery system, but the process and rules are different. In China, you usually don’t need to prepay the full amount when you apply – you just need sufficient trading quota eligibility (often based on past holdings). Winners are allotted shares and then pay for them. Additionally, Chinese IPO pricing is often regulated and new stocks have daily price movement limits after listing (e.g. a 44% first-day cap on main boards), which is not the case in Hong Kong. Mainland investors face strict eligibility rules and can’t use margin financing easily for IPOs. In short, Hong Kong’s IPO process is more market-driven and accessible, but requires upfront funds (which will be frozen during the offer period).

• United States: In the U.S., average retail investors typically cannot directly subscribe to IPOs at the offering price. IPO shares are mainly allocated to institutions or certain broker clients. Most U.S. retail investors buy the stock after it starts trading on an exchange. There’s no concept of a public lottery for IPO shares as in Hong Kong. So Hong Kong offers a more level playing field for individuals to get in at the IPO price.

Another difference is trading freedom: Hong Kong allows same-day trading (no lock-up for retail), no price caps on moves, and even physical share certificates if desired – features that contrast with mainland practiceshkex.com.hkhkex.com.hk. Investors should note these differences and exercise prudence when entering a new markethkex.com.hk.

2. Accounts, Platforms, and Capital Requirements

Before you can subscribe to an HK IPO, you need a proper trading account and funding in place. Here’s what you’ll typically require:

• Hong Kong Brokerage Account: You must have a brokerage account that trades Hong Kong stocks. Many mainland investors use online brokerages like Futu (Futubull), Tiger Brokers, or Hong Kong arms of brokers/banks (e.g. HSBC, CITIC Securities HK, etc.) that accept mainland clients. Open an account well before the IPO you’re eyeing, as verification can take timeinteractivebrokers.com.hk. You’ll need valid ID (passport/Mainland ID), proof of address, and likely to complete a KYC process.

• Trading Platform: Most brokers provide mobile apps or web platforms where you can view IPO offerings and submit subscriptions. For example, HSBC and others have eIPO serviceshsbc.com.hk, and apps like Futu offer dedicated IPO subscription portals. You can also use the HKEX’s White Form eIPO service (online) or even submit physical forms via banksifec.org.hkifec.org.hk, but nowadays it’s easiest to apply through your broker’s electronic platform, which will handle the application for you.

• Currency and Funds: Hong Kong IPOs are in HKD (Hong Kong dollars), so you need to fund your account with HKD or a currency your broker can convert. Mainland investors should plan how to transfer money across the border. China’s foreign exchange rules allow each individual to convert up to US$50,000 (approx. HK$390,000) per yearwise.com. If you need more, you might spread across family members or use legitimate channels in multiple years. Funds can typically be wired or transferred via bank or sometimes via a broker’s supported payment methods (some fintech brokers offer RMB to HKD conversion within their app). Make sure to account for bank charges and exchange rates.

• Sufficient Capital or Margin: For a cash application, you’ll need enough cash in your account to cover the full IPO application amount (price * number of shares + fees) – this can be tens of thousands of HKD depending on how many lots you apply for. If you plan to use margin financing, you’ll need at least the initial margin requirement (often a fraction of the total) and to be approved for margin by your broker. Margin will allow you to borrow funds to boost your application (more on this later). Always maintain a buffer to cover any interest or fee charges.

• Fee Considerations: IPO applications incur some fees. Brokers may charge a nominal IPO handling fee (for example HK$50–$100 or a small percentage) and the exchange charges a transaction levy and trading fee on any allotted shares (usually minimal per share). These are usually included in the application payment. If you use margin, interest costs will apply.

Tip: It’s wise to have your account funded a few days before you apply. Hong Kong IPOs typically deduct the money at application time. If you’re moving money from the mainland, remember that transfers can take time and may require documentation. Having a Hong Kong bank account linked to your brokerage can simplify fund transfers.

3. Step-by-Step: The Hong Kong IPO Subscription Process

The IPO subscription process in Hong Kong for retail investors involves several stages. Below is a step-by-step walkthrough from preparing your account to the stock’s listing day:

1. Open and Fund a Brokerage Account: As mentioned, ensure your Hong Kong trading account is active and funded with sufficient HKD. This is the foundation – you can’t participate without it.

2. Research Upcoming IPOs: Check an IPO calendar or your broker’s app for upcoming deals. Each IPO will have a prospectus and an offer period (usually a few days) when you can apply. Read basic info like the company’s business, offer price range, and dates for subscription and listing.

3. Decide on Cash vs Margin: Determine if you’ll use only your cash or leverage with a margin loan (more on cash vs margin in the next section). If using margin, ensure you have that feature enabled and understand the interest rate and maximum multiple you can borrow.

4. Submit the IPO Application: During the subscription period (typically 3 to 3.5 days longitiger.com), log in and apply. On the broker’s IPO page, enter how many shares or lots you want. The minimum is usually 1 board lot (the standard lot size, e.g. 100, 500, or 1000 shares – specified in the prospectus)itiger.com. The application must be in whole lots. If the IPO has a price range, most brokers will earmark funds at the upper price for safety (excess is refunded if final price is lower). Pro Tip: You can only submit one application per person for the public offer. Submitting multiple through different brokers in your same name will result in all being rejected. However, some investors use family member accounts to submit additional applications.

5. Pay the Application Money: If applying through your broker, your account will be debited for the application amount immediately (or your cash will be frozen). If you apply via the White Form eIPO (less common nowadays for retail), you’d pay via bank transfer or PPS. In either case, funds are held until allocation. (Under the new HKEX FAST IPO system introduced in late 2023, very large oversubscriptions may not require full funds upfront beyond a certain pointyicaiglobal.com, but generally, expect your money to be tied up for about a week).

6. Waiting Period: Once the offer closes (usually at 11:30 a.m. on the last day for brokers, or a bit later for eIPO), you wait for the allotment results. During this time, the IPO’s pricing is determined with institutional investors (if a price range was given, the final price is set, often at the high end if demand is strong). If the IPO was hugely popular with retail, the clawback kicks in to give retail a larger share of the pie (e.g. Guming’s IPO had such high retail demand – 195× the shares on offer – that the retail allocation was boosted from 10% to 43.5% of the dealreuters.com).

7. Allocation Results Announcement: Typically 2 days before listing (T-2), the company and exchange announce how the shares were allocateditiger.com. You can check the allocation in the evening on the HKEX news website or simply wait for your broker to notify you. The results will tell you how many shares you got (it could be zero if you were unlucky in the lottery, especially if it’s oversubscribed). Allotment is basically a lottery – for popular IPOs, small applications might only have, say, a 10% chance to get 1 lot. Larger applications have higher chances or multiple lots, but there’s an element of random draw. (Two guiding rules: more shares applied = higher chance, and allotments are as even as possible so no one with the same application size differs by more than 1 lot)itiger.com.

8. Receiving Shares and Refunds: On allotment day (usually T-1, the day before trading starts), if you were successful, the new shares will be credited to your brokerage account before the grey market opensitiger.com (or at least by listing day morning). Any money for shares you didn’t get is refunded at this time as wellitiger.com. For example, if you applied for 10,000 shares but only got 500, the payment for the other 9,500 shares (and any difference if final price was below max) is returned to your cash balance. (If you applied via bank/eIPO, they’d mail you a refund check or deposit to your bank – but with brokers it’s just an electronic refund.)

9. Grey Market Trading (Optional): Some brokers offer an unofficial “grey market” trading session on the evening before the official listing. This allows those who got shares to trade them among broker clients, giving a preview of the stock’s demand (more on grey markets in section 7). Participating is optional – many beginners skip it. If you do trade, note it’s riskier and outside regular exchange supervision.

10. Listing Day – Start of Trading: The IPO officially lists on the HKEX, usually at 9:30 a.m. on the scheduled date. Your allotted shares are now just like any other stock holding – you can sell them, hold them, or buy more. There is no restriction on flipping; you can sell all your IPO shares the moment trading begins if you want. The price can be very volatile on day one, especially for highly anticipated IPOs. Keep in mind Hong Kong has no price limit – a stock can double or drop 30% or more in a single day, so be prepared for swings.

11. Post-Listing: If you used margin, once the IPO is over, settle any interest or loan repayments. Most brokers automatically deduct the loan interest from your account (covering the days the money was borrowed). If you didn’t get any shares, you still pay the interest for the period your money was leveraged – although with modern systems and hot deals, some brokers now offer interest rebates or even 0% interest to attract IPO clientsyicaiglobal.com. After listing, any shares you hold will be subject to normal market movements. You can treat it as a normal investment or decide to sell based on your strategy.

Throughout the process, pay attention to announcements from your broker or the company. Hong Kong IPO timelines are fairly short – typically about a week from subscription opening to trading – which is much faster now than in the past (the new FINI system introduced in 2023 shortened the wait)yicaiglobal.com.

4. Cash Subscription vs. Margin Financing

When applying for a Hong Kong IPO, you generally have two funding methods: cash or margin. Here’s how they differ and what to consider:

• Cash Subscription: You use your own money for the entire application. If you want to apply for say HK$50,000 worth of shares, you must have HK$50,000 available. The advantage is simplicity – you won’t incur interest costs, and you can’t lose more than you invest. For beginners or those with limited risk appetite, cash is straightforward: you either get shares or your money comes back (plus any small interest the bank might pay on IPO escrow, though nowadays that’s negligible). The downside is your capital is tied up (not earning other returns) during the IPO period, and you might only get a small allocation in an oversubscribed deal, meaning a lot of idle cash for little result.

• Margin Financing (IPO Loans): This is a popular feature in Hong Kong IPOs. Brokers will lend you money to subscribe for more shares than you could with cash alone. For example, if you have HK$10,000, and the broker offers 10× leverage, you could apply for HK$100,000 worth of IPO shares by borrowing HK$90,000. Margin lets you amp up your application size, which increases your odds of getting an allocation (and potentially more profit if the stock pops). Hong Kong brokers compete on IPO financing offers – many provide very low interest rates for the short subscription period, even 0% interest in some cases for hot IPOsscmp.comyicaiglobal.com. They also offer high leverage: typically up to 10× for normal deals, and up to 20× for highly sought-after listingsyicaiglobal.com. In extreme situations, some brokers offered 100× leverage – as happened with Mixue’s IPO (a few firms let top clients borrow 100:1, fueling record subscriptions)yicaiglobal.com!

  How it works: If you choose margin, you’ll indicate that in your application. Your broker will still freeze your portion of cash and then lend the rest. For instance, at 10×, every $1 of yours is paired with $9 of their loan. You pay interest on the loan for the days it’s borrowed. If you get any shares, you’ll typically keep the loan equivalent to those shares and repay it by settlement (usually the loan is automatically repaid using the refund from the shares you didn’t get). Important: The interest is charged on the full loan amount for the duration, regardless of how many shares you end up with. If you get no shares at all, the loan is canceled, but you still owe the interest for the few days.

  Costs and risks: IPO margin interest rates are quoted as an annual rate but applied pro rata for the days of the loan. For example, 3% annual might be ~0.008% per day. If the money is tied up for ~1 week (say 7 days), 3% annual equals about 0.06% of the loan in interest cost. If you borrowed HK$90k, that’s around HK$54 interest. Some brokers also charge a one-time fee on margin applications. Others, as noted, subsidize or waive interest to attract businessscmp.com. The risk with margin is if the IPO investment goes wrong. Suppose you get shares and the stock falls below the IPO price – your loss is magnified because you essentially invested with borrowed money. Example: you use $10k cash + $90k loan to get shares, and you’re allocated $10k worth of stock which drops 10% ($1k loss). You still pay interest on $90k, so you might lose $1k + interest on a deal where if you only used $10k cash, you might have only applied for one lot and maybe not even gotten shares. Margin amplifies both chances and losses. Also, if an IPO is very weak and somehow you got a large allocation (more than expected), you must have the means to cover that loan or you might face a margin call. Generally for hot IPOs, the concern is not over-allocation (it’s under-allocation), but it’s something to bear in mind for smaller, lightly subscribed deals.

Which to choose? For big, popular IPOs, many retail investors use margin to maximize their lottery tickets, because the interest cost is small relative to potential first-day gains. For instance, in Mixue’s IPO, retail investors borrowed an astounding HK$1.83 trillion in total via brokers, oversubscribing the shares by over 5,295×scmp.com. Such demand was fueled by easy margin loans and even zero-interest offersscmp.com. If you have access to cheap margin, it can be worthwhile. However, if you’re risk-averse or the IPO’s outlook is uncertain, you might prefer to use only cash so you don’t owe anything if things go south. Bottom line: Never borrow more than you can afford, and understand that margin is a double-edged sword – great for boosting small profits (when IPOs go up) but capable of increasing your losses if an IPO disappoints.

5. How to Read an IPO Prospectus (Key Points for New Investors)

Every company listing in Hong Kong issues a lengthy prospectus (offering document) that contains a wealth of information. These documents can be hundreds of pages, which is daunting for beginners. The good news is you don’t need to read every word. Focus on these key sections and points:

• Company Overview and Business Model: Early in the prospectus there’s usually a summary of what the company does, its products/services, and industry position. Make sure you understand how the company makes money and what its competitive advantages are (or if it even has any). For example, the prospectus might reveal that a bubble tea chain like Mixue earns not just from retail drinks but primarily from supplying ingredients to franchisees (an important insight)reuters.comreuters.com. Such details help you judge the business quality.

• Industry and Market Background: Many prospectuses have a section with statistics about the company’s industry, often compiled by a third-party consulting firm. This can tell you if the sector is growing, saturated, what the trends are, and where the company stands among peers. For instance, if you’re looking at an education company IPO, you’d want to know if the education sector is expanding and government policies affecting it.

• Financial Track Record: Look at the financial statements (usually last 3 years of income statements, balance sheets, cash flows) and key figures like revenue, profit, profit margins, debt levels, and cash flow. Is the company profitable? Is profit increasing year-on-year? High growth can be a good sign, but also check profitability – some IPOs are loss-making startups (you then must believe in future earnings). Compare margins or growth rates to peers if you can. Also note any one-off gains/losses that inflate numbers.

• Valuation and IPO Pricing: The prospectus will indicate the offer price or a range. From that, calculate basic valuation metrics: price-to-earnings (P/E) ratio (if profitable) or price-to-book if relevant, etc. Often news sources or the company will mention the P/E. Compare it to similar listed companies. If the IPO P/E is 50 while peers trade at 20, the stock could be considered expensive (unless this company has superior growth). Sometimes hot companies intentionally price high, betting on demand – you need to recognize if you’re paying a premium.

• Use of Proceeds: See how the company plans to use the money raised. Common uses are expansion, R&D, debt repayment, etc. If a large chunk is going to pay off loans or to selling shareholders (in a secondary sell-down), that might be less exciting than money going into growth projects. It’s generally a good sign if the IPO funds are to expand the business, which could lead to higher future earnings.

• Major Shareholders and Cornerstone Investors: The prospectus lists current owners and any cornerstone investors (big names who agreed to buy in before the IPO). Cornerstone investors can be a green flag: if reputable institutions or industry players are investing, they likely did due diligence. They also usually hold shares for 6 months, which can provide price stability. For example, Mixue’s IPO had five cornerstone investors including funds like Boyu Capital, Hillhouse, and even Meituan’s investment armscmp.com – seeing those names might give confidence that savvy investors see value. Check the lock-up periods: cornerstones often locked 6 months, management and pre-IPO shareholders might have 6-12 month lock-ups. This means they won’t dump shares immediately, reducing short-term supply.

• Risk Factors: This section can be long, but at least skim it to catch any red flags. They’ll mention things like reliance on key customers or suppliers, regulatory risks, any legal proceedings, etc. For instance, if a biotech IPO depends on one drug approval, that’s a huge risk; or a tech IPO might warn that it’s never turned a profit. While every prospectus lists numerous risks (some very generic), look for the specific, significant ones that could seriously impact the company.

• Dividend Policy: If you care about dividends, see if the company has a policy (many growth companies won’t pay dividends initially). If it’s a state-owned enterprise IPO, they might commit to a certain payout ratio.

• “How to Apply” Section: For practicality, the prospectus tells you the methods to apply (white form, yellow form, broker, etc.)ifec.org.hk. If you’re using a broker, you can mostly ignore this, but it’s good to know deadlines (they often list the closing time, etc.).

• Interim Period Updates: If a prospectus is issued a while before listing, check if there were any updated financials in a supplemental filing (sometimes called a Webb-site document or an addendum if market conditions changed).

As a beginner, you might not understand everything you read in a prospectus, but focusing on these areas will give you a decent picture of the IPO’s attractiveness. You can also read analyst reports or financial news summaries about the IPO for highlights. Remember, a prospectus is written by the company (with lawyers and bankers) – it must be truthful, but of course they will present their story in the best light allowed.

6. Deciding if an IPO Is Worth Applying For: Key Metrics and Factors

Not every IPO is a good opportunity. Some debut strongly and reward investors; others can flop, leaving subscribers with losses. Here are key factors and metrics to consider when judging an IPO’s prospects:

• Valuation vs. Peers: As mentioned under prospectus reading, check the implied valuation (e.g. P/E ratio) and compare with similar listed companies. If an IPO is priced richly compared to peers without a clear reason (higher growth, market leader etc.), be cautious. An overvalued IPO may struggle to rise much on listing, or worse, might fall. For example, if a new restaurant chain IPO is asking for 30× earnings while established restaurant stocks trade at 15×, that’s a warning sign.

• Oversubscription Levels: In Hong Kong, the subscription demand itself becomes a metric. If you can track how many times the retail tranche is subscribed, it gives insight into market sentiment. Extremely high oversubscription often correlates with a first-day pop (due to scarcity of shares and buzz). For instance, Mixue’s IPO was astronomically oversubscribed – retail orders exceeded shares by 5,258×reuters.com – and the stock jumped nearly 47% on debutreuters.com. By contrast, if an IPO barely meets its subscription (or is only say 2× subscribed), it may open weakly because supply and demand are more balanced or there’s lukewarm interest. However, beware: oversubscription is not a guarantee of success. The case of Guming illustrates this – its retail tranche was 195× oversubscribedreuters.com (high enthusiasm), yet the stock fell 9% on day onereuters.com. Why? Possibly too high a pricing and many investors flipping out immediately, which leads to the next points.

• Industry Trend & Sentiment: Consider the industry’s current story. Is it booming or facing headwinds? In late 2023 and 2024, for example, there were several bubble tea chain IPOs (like Nayuki, Cha Bai Dao, Guming, Mixue). By the time Guming listed in early 2025, investors were wary because peers had underperformed after listingreuters.com. A saturated sector with multiple IPOs can dilute enthusiasm. On the other hand, a company in a hot sector (say, EV batteries or biotech, if those are in vogue) might benefit from positive sentiment. Always ask: will investors want this stock? Is there a growth story that people are excited about?

• Company Quality and Fundamentals: Does the company have solid financials? Growing profits? A strong brand? For example, Mixue was well-known with over 45,000 stores and real profitsreuters.comreuters.com, giving investors confidence. If an IPO is for a company with huge losses and unclear path to profitability, it might still get hyped (if it’s a concept stock), but it’s riskier to chase. Look at revenue growth, profit margins, and any competitive moat.

• Cornerstone and Institutional Demand: A look at the international (institutional) tranche demand is useful. If the IPO’s international portion is many times covered (subscribed by big investors), that’s a good sign – smart money is interested. The prospectus or IPO press releases often say if the international book was, say, “10× covered.” Also, check who the cornerstone investors are (if any) and how much they took. High-quality cornerstone investors and strong institutional interest indicate confidence in the IPO. Conversely, if an IPO has to rely mostly on retail with little cornerstone support, it could mean institutions weren’t as keen.

• Market Conditions: The overall stock market matters. In a bull market, IPOs tend to perform better across the board (investors are optimistic and flush with cash). In a bearish or volatile market, even good companies might have soft listings. For instance, if the Hang Seng Index has been sliding, people might be more cautious on new listings. Hong Kong IPO volumes rebounded in early 2025 after a dry 2022–23 partly because market sentiment improvedreuters.comreuters.com. Always gauge the broader climate.

• IPO Size and Float: Very large IPOs (raising billions) can behave differently from small cap IPOs. A mega IPO might not pop as much because there’s ample supply for those who want shares, and lots of institutional involvement (reducing volatility). Small IPOs with tiny floats can sometimes skyrocket on speculation or drop sharply due to low liquidity. Check the deal size and how much of the company is being floated – a small float means fewer shares trading, which can exaggerate moves (up or down).

• Lock-up Expiry Considerations: Not for immediate trading, but note if huge blocks of shares (from pre-IPO shareholders or cornerstones) will unlock in 6 months. If you plan to hold, that event can put pressure on the price later.

• Grey Market Price Indication: If available, the grey market (explained next) gives a sneak peek at what price the stock might trade at. If the grey market has the stock 20% above the IPO price, that’s an indicator of a likely strong open. If it’s below the IPO price in grey market, that’s a big warning sign that you might incur a loss if you got shares. Many investors decide last-minute to apply or not apply based on rumored subscription rates and grey market sentiment.

In essence, weigh the hype vs. reality. Don’t just apply for every IPO blindly. Some seasoned IPO investors only apply for deals they deem likely to jump on debut (taking quick profits), while they skip ones that look overvalued or fundamentally weak. Also consider your own interest: Do you mind tying up money for a week for a 1% chance to get shares? Or would you rather avoid the lottery and just buy good stocks later? One useful statistic: On average, Hong Kong IPOs in 2024 saw about a +7.6% first-day gain, and in early 2025 the average first-day pop was around +11.7%reuters.com. That implies many IPOs do give a positive return initially, but some will be negative. By evaluating the above factors, you can try to pick the likely winners and avoid the disappointments.

7. Grey Market Trading: What It Is and What It Signals

You may have heard of the “grey market” (or “gray market”) for IPOs in Hong Kong. This is an unofficial, after-hours trading session before the stock formally lists. Here’s an overview:

What is the grey market? It’s basically over-the-counter (OTC) trading of the IPO shares facilitated by certain brokers internallyitigerup.com. After the IPO allotment is done (typically the evening one day before listing), some brokers allow clients who got shares to sell them to other clients who want to buy, at negotiated prices. This trading doesn’t happen on the HKEX exchange; it’s on the broker’s own platform. Not all IPOs have a grey market – generally only Main Board IPOs do, and only if a broker sets it upitigerup.com. (GEM board IPOs usually don’t have grey market trading due to rules and riskitigerup.com.)

When does it happen? Grey market trading hours are usually 4:15 pm to 6:30 pm on the day before the official listingitigerup.com (after the regular stock market closes for the day). If that day is a half-trading day, it might run 2:15 pm to 4:30 pmitigerup.com. It’s a short session where early price discovery can occur. For example, if an IPO lists on Thursday, the grey market would be Wednesday 4:15-6:30 pm.

Why is it useful? The grey market provides a price indication. It effectively simulates supply and demand with a subset of market participants. If the IPO was, say, priced at HK$10, and in the grey market it trades up to HK$15, that’s a 50% jump – suggesting a very strong debut the next morning. Conversely, if it trades at HK$9 in grey (below the IPO price), that’s a bad omen – it implies lackluster demand and that the stock might open below IPO price on listing day, causing losses for those who subscribed. Many investors watch grey market quotes as a gauge of sentiment.

Can you trade in the grey market? Only if your broker offers it and you either were allotted shares (to sell) or have excess cash (to buy). Common brokers that have grey market platforms include Phillip Securities (“PhillipMart”), Futu, Bright Smart, etc. If you got shares and want to lock in profit or cut loss early, you might sell in the grey market. If you missed out (got zero shares) and really want in, you might buy some in grey. However, approach with caution: grey market prices can be volatile and the market is less liquid and more speculative. There’s also no circuit breaker or robust regulatory oversight in that session.

What does grey market tell you? It’s an indicator, not a guarantee. A strong grey market price often does translate to a strong open, because it shows unmet demand – e.g. people are willing to pay above IPO price to get the stock. A weak grey market suggests over-supply or low enthusiasm. For instance, if a hyped IPO surprisingly trades down in grey, many might brace for a flop. But things can still change by next morning. Sometimes, small volumes in grey can distort the price. Also, not all investors participate in grey; some big institutions can’t trade there and wait for the real market. Use it as a sentiment signal, but be careful making big moves solely on grey prices.

In summary, grey market trading is like a preview of the IPO’s trading. As a beginner, you’re not obliged to use it – you can simply watch it for info. If your broker allows and you decide to trade, ensure you understand the mechanics (only limit orders are usually allowed in greyitigerup.com) and be prepared for sharp moves. Many retail investors find grey market outcomes helpful: a bonus gain if you sell high in grey, or an early warning to cut losses if it’s below water. Just remember, the official listing day is when the broader market weighs in, which is what ultimately matters.

8. Risks and Strategies in IPO Investing

Like any investment, IPOs come with risks, and you should approach them with a strategy in mind. Here we outline the main risks of IPO investing in Hong Kong and some common strategies that retail investors use:

Key Risks:

• Post-Listing Price Drops: The most obvious risk – the stock can trade below the IPO price, meaning you lose money on paper immediately. This can happen if the IPO was overpriced or if market sentiment turns. We saw this with Guming Holdings: despite being oversubscribed, its shares opened around HK$10 and quickly fell to HK$8.93, closing ~9% below the IPO price on debutreuters.com. Investors who got shares lost money on day one. There’s no guarantee an IPO will pop; some actually flop right out of the gate.

• Low Liquidity & Volatility: Smaller-cap IPOs might have low trading volume after the hype dies down. If few people trade the stock, the price can swing wildly on any given day, and selling a large position without moving the price can be hard. Illiquid stocks can stagnate or drift down over time due to lack of interest. Also, Hong Kong has no daily price limit for most stocks, so in extreme cases, prices can plunge dramatically in a short time if bad news or sell-offs occur.

• Margin Amplified Losses: If you used margin financing and the stock drops, your percentage loss is larger (because you effectively invested more money than just your cash). Plus, you’ve incurred interest costs. If the drop is big and you had a large allocation, you might face a margin call. This scenario is somewhat rare for IPO allocations (since very oversubscribed IPOs usually give small allocations, and undersubscribed IPOs you wouldn’t use much margin), but it’s a risk to be aware of. Never be lulled by the notion that “IPO stocks always go up” – they don’t, especially in tougher market conditions.

• Opportunity Cost & Frozen Funds: When you tie up funds in an IPO for a week, that money can’t be used elsewhere. If the market had a big opportunity or your other investments needed cash, you might miss out. Also, if you repeatedly put cash into every IPO and many don’t give allocations, your money keeps sitting idle (though some might see that as a minor issue given the short duration).

• Listing Delays or Cancellations: Sometimes IPOs get delayed or even cancelled (e.g. regulatory issues or insufficient demand). If that happens after you subscribed, your money would be refunded, but you lose the interest/time value while it was frozen, and you might have to redeploy funds elsewhere. It’s not common in Hong Kong for an IPO to cancel last minute (companies usually won’t launch if demand is absent), but it has happened (the famous Ant Group IPO in 2020 was pulled at the final moment by regulators).

• Underlying Business Risks: By investing, you’re exposed to the company’s fortunes. If the company hits a scandal, regulatory crackdown, or just performs poorly after listing, the share price will reflect that in the long run. For instance, education-related stocks plunged when China announced education reforms in 2021 – any newly listed education IPO around then would have cratered regardless of IPO hype. So beyond the initial trading, consider what could go wrong for the business.

• Psychological and Behavioral Risks: The IPO process can be emotional. You might feel FOMO (fear of missing out) on a hot deal and over-allocate to IPOs that aren’t actually good. Or if you get shares and the price jumps, greed might make you hold too long and then the price falls back. If price falls, fear might make you sell at a low. Be mindful of these biases.

Common Strategies:

• “Flipping” (Immediate Sale): A very popular strategy in Hong Kong is to sell the IPO shares on the first trading day (or even in the grey market, pre-listing) to lock in the initial pop. Many retail investors do this if the stock opens strong. The logic: IPO first-day gains can be transient – often driven by initial excitement. By flipping, you realize profits before any potential pullback. For example, if you were allotted shares of a hot IPO and it opens +30%, a flipper would sell into that strength and take the quick profit. This strategy works best in bull markets or for hyped IPOs. However, if everyone flips, it can cause selling pressure later in the day. Flippers need to be attentive to market conditions – usually selling early in the session is key, as sometimes prices peak in the morning and then fade.

• Staggered Exit or Partial Flip: If you got multiple lots, you might sell some on day one to secure profit, and keep some for potential further upside or long-term hold. For instance, if you got 2 lots, sell 1 lot for a quick gain, let the other ride if you have faith in the company. This way, you bank something and still have exposure.

• Long-Term Hold (Investing, Not Trading): Perhaps you believe the company is a gem and will grow over years. You might choose to hold your IPO shares for the long haul, ignoring short-term volatility. This is more “investor” than “speculator” approach. If you do this, hopefully you applied not just for the flip but because you truly wanted to own the company. Ensure the fundamentals justify it. Many great companies (Tencent, Alibaba, etc.) were IPOs once – and those who held made fortunes. But many companies also slide after initial hype. So only hold if you have done your homework and have conviction. Also, if you’re holding, don’t use margin (or if you did for application, pay it off) – you don’t want interest costs eating you if holding long-term.

• Cutting Losses: If an IPO opens below water or quickly reverses into loss territory, you need a plan. Some investors set a mental stop-loss (e.g. “if it falls 10% below IPO price, I’ll sell to prevent deeper losses”). Others might give it a bit of time to see if it recovers. There’s no right answer, but don’t let a small loss become a huge one due to denial. The market doesn’t guarantee a rebound to IPO price (some never come back). For example, if you held Guming’s shares after the debut loss hoping it’d rebound later – it might or might not. Often, if the broader market is good, a weak IPO might catch up; but if not, it could keep sinking. Setting an exit strategy for bad scenarios is wise.

• Selective Participation: Another strategy is to be picky – only subscribe to IPOs that meet certain criteria (strong fundamentals, reasonable valuation, high expected demand). You don’t have to play every IPO. Some investors skip small or “story” companies and only go for bigger names or those in sectors they like. This can improve your hit rate and conserve capital.

• Applying Many Applications (Advanced): Some folks use multiple brokerage accounts or family members to apply separately, which can marginally improve chances in a lottery (since each account could get a small allotment). This is more of a tactic than a strategy, and one should be careful about legal/ethical considerations (you can’t use the exact same name twice, but spouse or relative accounts are commonly used in practice).

• Stay Informed & Flexible: Keep an eye on news or chatter during the IPO week. Sometimes sentiment changes – e.g. if a big IPO elsewhere flops, it might dampen sentiment for yours, so you might adjust your plans (maybe reduce the size or prepare to be cautious on listing). Or if an IPO gets a last-minute surge in margin subscriptions (a sign of hot demandscmp.com), you might get more aggressive.

Risk Management: Ultimately, only invest what you can afford to lose. IPOs are often speculative in the short run. If you use margin, understand your worst-case scenario. If an IPO doesn’t pan out, don’t chase it down (throwing good money after bad) unless you have strong conviction it’s undervalued after dropping. And don’t let the excitement make you over-leverage your overall portfolio.

Remember: Not every IPO is a sure win. There will be losers. But Hong Kong’s market structure (with frequent underpricing and pent-up retail demand) does often yield positive first-day outcomes on averagereuters.com. Approach IPOs as one tool in your investing toolkit – manage the risks, play smart, and you can tilt the odds in your favor.

9. IPO Timeline Overview – From Funds Frozen to Shares Listed

It’s helpful to visualize the timeline of a Hong Kong IPO process, especially regarding how long your money is tied up and key milestones. Here’s a typical schedule assuming a Main Board IPO (exact days can shift due to holidays or special cases):

• T (Launch Day): The IPO opens for subscription. Prospectus is published on the HKEX website and the company might do marketing roadshows. Retail investors can start applying through brokers or eIPO. Let’s say this is Day 0 (for example, a Tuesday morning).

• T + 3 days (Closing Day): The IPO subscription period usually lasts 3 to 3.5 daysitiger.com. For instance, if it opened Tuesday, it might close Friday 11:30 am (if 3.5 days). Sometimes it closes in 3 days if launched Monday to Thursday noon, etc. This deadline is when brokers stop accepting applicationsitiger.com. At this point, your funds are definitely debited/frozen. After closing, no more applications – the books are “closed.”

• T + 3 to 4 (Price Determination): Right after the close (T+3 or T+4 depending on half days), the company and underwriters determine the final offer price (if there was a range). They consider the demand from institutional investors and maybe adjust the price to the top of range if oversubscribed, or possibly low/mid if demand was weak. Retail always pays the final price (if you paid at top initially, the difference is refunded).

• T + 5 or 6 (Allotment Results, Refunds): Typically on the second business day before listing (T-2), allocation results are announceditiger.com. That evening or next morning:

  • The company issues an allotment results notice (often in newspapers and online) detailing how many subscriptions were received and the basis of allotment (e.g. “1 lot for each 10 lots applied” etc for each tier – interesting reading for statistics nerds).

  • Brokers inform clients of their personal result. You might get an email or app notification of how many shares you got.

  • The “despatch of refund cheques” happens (that’s language from prospectuses). In practice, if you applied through a broker, the refund is electronic – your un-utilized money gets credited back to your account on the allotment dayitiger.com. If you applied via white form independently, a physical cheque might be mailed to you (which is why historically allotment day is also called refund day).

  • Shares are credited into your brokerage account (in the name of HKSCC nominee) usually by the end of this day or the next morning at latestitiger.com. Brokers often ensure shares are in accounts before grey market trading starts that evening so clients can trade if they want.

• T + 6 or 7 (Listing Day): The IPO officially lists on the HKEX and trading commences. This is usually one week after the open. For example, if opened Tuesday, it might list next Tuesday or Wednesday. It can vary, but one week is a good rough estimate under the new faster system. On listing day, any successful applicant can trade the shares freely. The IPO process is complete – it’s now just a listed stock.

• T + 6+ (Post-listing): If you continue to hold, it’s like any other stock. If you want to transfer shares to another broker or to a personal CCASS account, you can after listing. If you didn’t get any shares, you just have your refunded money ready for the next IPO or other investments.

Funds Frozen Duration: In the above timeline, if you applied on day 0 and got refund day at T+5 or 6, your money was tied up for about 5-7 days. With the FINI system launched in Nov 2023, Hong Kong shortened the time between closing and listing, so retail funds aren’t frozen for as long as beforeyicaiglobal.com. It used to be nearly 2 weeks under old rules; now it’s roughly one week or less from application to trade. In some cases, when IPOs are very hot, they might even close a day early and list sooner. Always check the expected listing date – that tells you how long your funds will be in use.

Corporate Actions Timeline: Not directly IPO subscription, but once listed, note that Hong Kong has T+2 settlement for trades. If you sell on listing day, the cash from selling will settle two days later in your account (though your broker may give buying power instantly, but withdrawal likely after settlement). If you want to withdraw IPO refund money, you can usually do so as soon as it’s back in your account (T-1 or T-2).

Clawback effects: If an IPO triggers a clawback (high oversubscription), the announcement on allotment day will reflect the increased retail allocationreuters.com. This is just informational for you; what it meant was more shares went to the public pool. Practically, you might notice extremely oversubscribed IPOs tend to give many people at least one lot in the lottery (spread thinly).

Timeline example: Let’s illustrate with a hypothetical:

• Jan 1 (Mon): Prospectus out, IPO open.

• Jan 4 (Thu): IPO closes at 11:30am.

• Jan 9 (Tue): Allotment results out in evening, you find out you got 1 lot. Refunds processed.

• Jan 10 (Wed): You see refund money back, shares in account by afternoon. Grey market trading at 4:15pm (you could sell now if you want).

• Jan 11 (Thu): Listing day – stock debuts on HKEX, you can trade on open market. That’s a 10-day total span, but Jan 1-11 includes two weekends likely. Actual business days your funds were out: Jan 1-9.

Always refer to the timetable in the IPO prospectus; it lists exact dates for closing, results, and listing. Mark those on your calendar to stay on top of things.

10. Advanced Tools: IPO Calendars, Subscription Data, and Grey Quotes

To successfully navigate IPO investing, it helps to use some tools and information sources that are available to retail investors:

• IPO Calendars: These are schedules of upcoming IPOs and their key dates. Many financial news sites and broker platforms maintain IPO calendars. For example, Interactive Brokers HK lists current IPOs with their dates on their siteinteractivebrokers.com.hk. Websites like HKEXnews (the official exchange news site) also have sections for “New Listings”. Apps like Futu or Tiger have an IPO hub showing what IPOs are open, their price range, and even allow you to set reminders. Staying aware of the calendar ensures you don’t miss subscription periods, since they are short.

• Brokerage App Data & Push Alerts: Modern broker apps (Futu, Tiger, Moomoo, etc.) often display live or updated statistics during the IPO offering. For instance, some apps show how much margin money has been pledged across brokers for each IPO (this was reported for Mixue – e.g. the Futu app displayed that Futu’s clients had subscribed HK$1.07 trillion via margin for Mixuescmp.com). These figures can give you a real-time sense of retail fervor. You might see something like “Public tranche oversubscribed 200x” on the last day – useful to gauge if it’s worth applying or to adjust expectations of allotment. Some brokers also send push notifications: “IPO X oversubscribed by 50x, closing soon” – which is handy.

• Grey Market Quote Pages: If you don’t have a broker that provides grey market trading, you can still see grey prices through sources. Some financial news outlets or forums share grey market quotes in real time. For example, AASTOCKS and some Hong Kong finance blogs often post grey market closing prices for major IPOs. They’ll say “In grey market, stock XYZ closed at HK$Y, which is Z% above/below the IPO price.”aastocks.comaastocks.com (These might require refreshing manually or checking after grey market close.) Having an idea of the grey price helps set your strategy for listing day morning.

• Financial News & Forums: Keep an eye on outlets like South China Morning Post, Reuters, Bloomberg, etc., for any news on the IPO. Sometimes they reveal interesting tidbits like demand levels or analyst opinions. Forums like HKDiscuss, ShareGuru or Chinese platforms (雪球 etc.) might have discussions (though take those with a grain of salt – lots of rumors and unverified claims can circulate). Still, you might pick up sentiment cues, such as many people being excited or many being skeptical.

• Prospectus & Company Websites: The HKEX’s HKEXnews site publishes all prospectuses and announcements. You can download the prospectus PDF there (which is handy for searching specific info, like the financials or risk sections). Companies also often have an “Investor Relations – IPO” page on their site during the offering, with simplified highlights or presentation decks. Use these for more digestible info if reading a full prospectus is too much.

• Research Reports: If you have access, some brokerage research reports on IPOs give a succinct summary and even a recommendation (subscribe or not). For instance, local brokers sometimes publish IPO notes rating the deal. Even if you don’t have them, free summaries sometimes appear in news articles.

• IPO Allotment Results Lookup: HKEXnews will post a PDF or web notice with the allotment results. It typically lists the range of application sizes and how many got allocated. For example: “1 lot: 30% chance, 2 lots: guaranteed 1 lot, etc.” Many people check this to see how lucky they were relative to others, and it’s educational to see how oversubscription was handled.

• Historical IPO Performance Data: It might be useful to know how past IPOs have done, especially by sector or size. Some blogs or data sources compile stats like “average first-day gain in 2023” or “which sectors had the best IPO pops”. This can inform your expectations. (For example, tech IPOs might average higher pops than finance IPOs, etc.)

• Tax and Regulatory Info: Since mainland investors have specific tax and fund transfer considerations (next section), keep links to official info (SAFE rules for currency, tax rules for overseas stock income, etc.). Websites of banks or SAFE might have Q&A on cross-border investment.

In summary, leverage technology and information sources to stay informed. Set reminders for deadlines, watch live data if available to sense demand, and learn from post-IPO reports. Being well-informed will make you more confident in making decisions around IPO subscriptions.

11. Tax and Cross-Border Money Tips for Mainland Investors

Investing in Hong Kong IPOs as a mainland Chinese resident brings some additional considerations regarding taxes and moving money between the mainland and Hong Kong. Here are important points and tips:

• Moving Funds Out of Mainland: As mentioned, individuals in China can officially convert or remit up to US$50,000 (approx. CN¥350k) per year out of the countrywise.com. If you plan to frequently invest in HK, you might need to manage this quota. Tip: You could convert money in December and again in January to effectively use two years’ quotas in a short span if needed for a large sum. Some investors also use their spouse’s or parents’ quotas if it’s family money (each person gets US$50k). Always comply with regulations: large transfers might draw scrutiny. Avoid underground banks or illegal channels as those carry legal risk. Instead, use bank transfers, the Stock Connect’s special money channel (if using southbound), or brokers that have cross-border transfer arrangements. Some Chinese banks (like BOC, ICBC) allow you to open an HKD account and transfer under the quota easily.

• Repatriating Funds: If you sell your HK stocks and want to bring money back to the mainland, you’ll convert HKD to CNY and again be subject to the US$50k yearly limit. Plan such that you don’t get stuck unable to bring back proceeds in a timely manner. You could also keep the funds in Hong Kong for future reinvestment or until a new calendar year quota opens up.

• Mainland Tax on Overseas Investment: China taxes its tax residents on worldwide incomeifcreview.comifcreview.com. That means, in theory, your profits from Hong Kong stock trades are subject to Chinese income tax (classified as capital gains). The tax rate on capital gains for individuals is generally 20% in Chinaifcreview.comifcreview.com. However, there are important details:

  • If you invest via the Stock Connect (Shenzhen-HK or Shanghai-HK Connect), capital gains tax is currently exempt for mainland individualsifcreview.com. But Stock Connect doesn’t allow IPO subscription – it’s only for secondary market trading of certain stocks.

  • If you invest through a direct HK account (which IPO investors are doing), officially you are supposed to report and pay tax on the gains back home. However, unlike dividends (which can be taxed via withholding), capital gains tax relies on self-reporting because Hong Kong does not tax capital gains nor automatically report them for individuals. The Chinese tax authorities have been increasing scrutiny on offshore income via auditsifcreview.comifcreview.com. It’s something to be aware of, especially if your gains are significant. Some investors may choose to not voluntarily declare small gains, but technically that’s not compliant. For large sums, it’s wise to consult a tax professional.

  • Hong Kong tax: The good part is Hong Kong itself imposes no capital gains tax for investors, even foreign onesifcreview.com. Hong Kong also doesn’t tax dividends for individuals (except a 0.1% tax on banks’ dividends in some cases, but generally no). So all the tax concern is on the mainland side.

• Dividend Tax: If the stock you subscribe to pays dividends down the road, note that H-shares (HK-listed mainland companies) have a 10% withholding tax for non-mainland investors, and for mainland investors, they withhold 20% via Connectifcreview.com. For red-chip companies (mainland-controlled but incorporated outside China, listed in HK), effective tax could be between 10%–20% on dividends due to corporate withholdingifcreview.com. If you hold HK stocks directly in HK, many companies won’t withhold anything (if they’re not mainland enterprises). However, as a Chinese resident, you are supposed to declare those dividends as income and pay 20% tax (with credit if some was withheld)ifcreview.comifcreview.com. In practice, if you received dividends from a Hong Kong or foreign company into your HK account, Chinese tax authorities might only know if you report or if they investigate (CRS reporting could reveal offshore bank income potentiallyifcreview.com). Again, small amounts often slip under radar, but be mindful of the law.

• Tip – Use Connect for Secondary Trades: One strategy some mainlanders use: apply for IPOs via a direct HK broker (to get the shares), then if they plan to hold or trade long-term, they might transfer the shares to a mainland securities account that can hold through the Southbound Stock Connect (if they qualify), because trading gains via Connect are not taxed by China. However, this is complex and only possible for those in the Connect pilot cities with required qualifications. Most retail folks won’t do this. But you could consider selling your IPO shares on the HK market and later, if you want to reinvest in HK stocks long-term without tax, use Connect (bearing in mind IPOs themselves aren’t accessible through Connect at listing).

• No Stamp Duty Exemption: Hong Kong charges stamp duty on stock trades at 0.13% of the transaction value per trade side (recently raised from 0.1%). This applies to IPO shares when you sell them (and was applied when you bought at IPO but effectively it’s in the fees). There’s no exemption for anyone – it’s automatically deducted in transaction costs. So factor that in – it’s small, but on a large profit it’s a modest cut.

• Familiarize with Transfer Methods: To get money to your HK broker, you might be sending a wire to a bank in Hong Kong or using an intermediary. Some brokers have accounts with mainland banks (like a Shenzhen bank) to ease transfers – e.g. they might have a sweep account for clients to deposit RMB which then gets converted to HKD in your trading account. Check your broker’s funding methods; they often provide instructions for mainland clients. Always use your own name account to avoid third-party transfer flags.

• Track Your Transactions: Keep records of your deposits, withdrawals, profits and losses. This will help in case you need to calculate taxes or answer any questions from banks or authorities about source of funds. For example, if you one day transfer a large sum back to China and the bank asks, you can show it came from stock trading profits in Hong Kong (and be prepared to show you complied with any tax obligations on it).

• Be Aware of Policy Changes: The landscape evolves. The Chinese government has at times discussed loosening or tightening capital controls, and there have been talks about waiving the 20% dividend tax for mainland investors on Hong Kong stocksscmp.com to encourage cross-border investment. Stay updated on policy news – a tax waiver or new channel could benefit you, whereas a crackdown on undeclared offshore income could pose a risk if you’ve not been reporting.

In summary, plan your finances holistically. The IPO game isn’t just about applying and listing day – consider what happens after: if you make money, how will you bring it home, and what are the tax implications. Many mainland investors find the sweet spot by using their annual quota wisely and understanding that Hong Kong investment income might quietly fly under the radar – but you should always be prepared in case it doesn’t. When in doubt, consult a tax advisor who understands both Hong Kong and Mainland laws.

12. Is IPO Investing a Suitable Long-Term Strategy?

Now the big question: should you repeatedly invest in IPOs as a long-term approach? The answer depends on your goals and market conditions. Let’s weigh it:

Pros of IPO investing:

• IPOs can offer quick gains that outpace normal market returns. If you’re able to get allocations in quality IPOs, flipping them can be lucrative. Some investors in Hong Kong have made IPO flipping almost a side-business, enjoying frequent small profits. During bull markets or periods of high IPO activity, this can significantly boost returns.

• You get a chance to invest in companies at an early stage of their listed life, sometimes at a discount to what their price might become years later (if the company grows). For instance, someone who got in at the IPO of Tencent or Alibaba would have massive gains today. Thus, IPOs can be a way to snag long-term winners before everyone else fully piles in – if you identify the right ones.

• Diversification of opportunities: IPOs allow you access to companies across various industries that you might not have exposure to. They can keep your portfolio fresh with new stories.

Cons of relying on IPOs:

• It can be hit-or-miss. If your strategy is just “apply for everything and hope for the best,” you could find that a few bad IPOs wipe out the gains from many small good ones. Especially in lean years, many IPOs can underperform.

• There’s an element of luck in allocations. You might deploy a lot of cash and get nothing (which is just neutral), or get a small allocation that limits profit. Or ironically, get a full allocation in a bad IPO and then be stuck with a loss. Long-term, the more you play, the more these sort of average out, but it’s not a smooth equity curve.

• IPO market cycles: Hong Kong IPO activity ebbs and flows. Some years (like 2020-2021) were boom years with huge pops (due to tech listings, lots of liquidity). Other years (like 2022) saw many deals price cautiously or even get postponed due to poor market sentiment. If you focus only on IPOs, you might have dry spells where there’s nothing good for months, or a cluster of IPOs all doing poorly if the market is bearish.

Long-term performance of IPO stocks: It’s worth noting that many IPOs underperform the market in the long run. There’s a phenomenon where initial enthusiasm gives way to reality after a few months or a year, and a lot of IPO stocks drift down. For example, Top Education’s case: it had a positive 20% jump on day oneamtdinc.com, but in the years after, its stock gradually fell – from HK$0.33 IPO price in 2018 to around HK$0.05 by late 2024markets.ft.com, an over 80% decline. Early investors who held on saw their gains evaporate and turn into losses. This isn’t an isolated case; quite a few small-cap IPOs trade below their IPO price a year or two later, especially if they were hyped initially. On the flip side, some companies do flourish post-IPO and keep rising, but as a basket, IPO stocks often lag after the initial pop.

So is it suitable? If your goal is short-term profit and you have the time/interest to actively manage subscriptions, IPO investing can be a rewarding strategy in Hong Kong. Many retail investors incorporate it – treating it like a low-risk lottery (low risk in the sense that if you don’t get shares, you lose nothing but some opportunity cost, and if you do, you often can get out quickly either with a gain or a small loss). The key is discipline: cut losses on the ones that go wrong, and not get too greedy on the winners.

For long-term wealth building, blindly buying IPOs and holding them is probably not as effective as selecting good companies (IPO or not) to invest in. IPO mania can sometimes defy fundamentals in the short run. But in the long run, fundamentals win. If you plan to be a long-term holder, you should evaluate an IPO stock with the same rigor you’d evaluate any stock purchase, beyond the IPO hype.

One approach some long-term investors take is: use IPO flips to generate cash, and then deploy those profits into a longer-term portfolio. This way, IPO investing becomes a tactical, short-term operation that feeds your strategic, long-term investments in solid businesses.

Also, consider your personal situation: Do you have the capital to lock in IPOs regularly? Are you comfortable with the mechanics? Are you able to monitor the market on listing days to execute your strategy? If yes, IPO investing can be an active addition to your strategy. If not (say you can’t easily follow up on allotments or trading), it might be better not to dabble too much and instead invest in known companies.

In conclusion, IPO investing in Hong Kong can be a great strategy for those who understand the game and manage the risks. It’s generally not a “set and forget” type of investing – it requires involvement. Some years it will contribute nicely to your returns, other times it may be a drag. Use it as one part of a diversified approach. And always remember: don’t get caught up in the hype. Each IPO should be assessed on its own merits. If you maintain a cool head, IPOs can indeed be consistently profitable – many local investors have proven that. But if you chase every deal with blind optimism, eventually one bad IPO can sting hard.

Case Studies: Lessons from Recent Hong Kong IPOs

To bring all the above concepts to life, let’s examine three recent IPOs – Mixue Group, Guming Holdings, and Top Education Group – and see what happened with them. These cases illustrate how different outcomes can be and what we can learn from each:

Case Study 1: Mixue Group (2025) – A Sweet Success

Mixue’s IPO became one of Hong Kong’s most oversubscribed, as the mainland tea and ice-cream brand’s popularity drew massive investor interest.

About the IPO: Mixue Group (stock code 2097.HK), known for its Mixue Ice Cream & Tea shops (the Snow King mascot), is China’s largest bubble tea and drinks chain. It launched its Hong Kong IPO in early 2025. The offering raised about HK$3.45 billion (US$444 million) by selling shares at HK$202.50 eachreuters.com. Retail investors went absolutely crazy for this IPO – the retail tranche was oversubscribed 5,258 timesreuters.com, one of the highest in HK history. Investors collectively put in over HK$1.6 trillion in ordersscmp.com! Brokers had never seen such a frenzy – margin loans totaling HK$1.77 trillion were usedyicaiglobal.com. Many brokers offered 0% interest and huge leverage (some up to 100×) to win clientsyicaiglobal.com. This shows how margin financing can drive a record-breaking subscription. Mixue also had strong fundamentals: a well-known brand with over 45,000 stores and solid profitsreuters.comreuters.com, plus five big cornerstone investors backing itscmp.com.

Outcome: On listing day, Mixue delivered a big jump. It opened at HK$262 (already 30% above IPO price) and closed as high as HK$298, about 47% above the IPO pricereuters.comreuters.com. This was a stellar debut – in fact, the best in years for a large IPO. Retail investors who got even one lot saw significant instant profit (one lot cost ~HK$20k, and profit was ~HK$9k at peak). The huge oversubscription meant most retail investors got zero or very few shares (hence the price was pushed up – many who wanted it couldn’t get it). This IPO reinforced a lesson: even in a seemingly saturated sector (bubble tea), if the company is top-quality and the market has pent-up demand, an IPO can soar. It also highlighted how policy changes (HK’s faster settlement reducing costsyicaiglobal.com) and easy financing can stoke retail participation.

Lesson: Mixue’s success teaches that a combination of strong brand/fundamentals + extreme investor enthusiasm = big first-day gains. If you sense an IPO has that mix (record oversubscription, famous name, good market sentiment), it can pay off to participate aggressively (with margin, etc.). However, such cases are rare – Mixue was compared to the frenzy of Ant Group’s would-be IPO. Also, for all the hype, note that if you didn’t get shares (which was likely), chasing it in the open market at 40% higher could be risky unless you truly believe in its long-term value. Always weigh if the post-pop price is justified. In Mixue’s case, some argued the IPO was actually priced reasonably (it gave a lot of upside to ensure a good debut), so even the 47% pop might have been within fair value range per some analystsreuters.com.

Case Study 2: Guming Holdings (2025) – Oversubscription but Underdeliver

About the IPO: Guming Holdings (1364.HK) is another Chinese bubble tea chain (known for the brand Gu Ming). It IPO’d in Hong Kong in Feb 2025, just shortly before Mixue. The offer price was HK$9.94 (set at the top of the range)reuters.com. Retail demand was very high – the public offer was 195× oversubscribedreuters.com, triggering a clawback that increased the retail allocation from 10% to 43.5%reuters.com. This means many retail investors applied (perhaps enticed by Mixue’s upcoming IPO and thinking this was the “next best thing”). Guming had some things going for it: a recognisable brand with 9,000 stores, and five cornerstone investors of its own (according to news, they raised about $202 million) – but the bubble tea sector had mixed sentiment, and Guming’s IPO valuation, while “relatively attractive” per some analysts, didn’t guarantee upsidereuters.com.

Outcome: On debut, Guming’s stock fell. It opened around HK$10 (just above IPO price) but quickly slid over 10% down to HK$8.93 before ending the day at HK$9.03reuters.comreuters.com. That’s about a 9.2% drop from the IPO price – a disappointing result when the overall market indices were up that dayreuters.com. Essentially, those who got Guming shares lost money if they sold on day one, and even if they held, the immediate paper loss was there. What went wrong despite the oversubscription? Analysts noted that many retail investors flipped the stock immediately (“sold the stock, casting a shadow…”)reuters.comreuters.com. The heavy oversubscription meant a lot of shares had to be allocated to retail (43.5% of the deal)reuters.com, and once trading began, a lot of those retail investors rushed for the exit – perhaps because the debut didn’t show strength, so people panicked to avoid lossesreuters.com. Additionally, sentiment for bubble tea IPOs was cautious – other tea beverage stocks had poor post-IPO performance (one peer was down 44% since listing)reuters.com. There was a sense that Guming, despite being a decent company, wasn’t exciting enough to defy the sector trend.

Lesson: Guming’s case is a cautionary tale: high oversubscription doesn’t guarantee a first-day pop. You must consider who is buying and who is selling. In Guming, the fact that retail got a large allocation meant there were a lot of potential flippers. When an IPO’s debut is “lukewarm”, those investors will rush to sellreuters.com, which can push the price down further. It becomes a self-fulfilling drop. This teaches the importance of market sentiment and momentum – if an IPO doesn’t start trading strongly, be prepared that many will bail out quickly, and you might have to join them or risk bigger losses. It also underscores that sector malaise can weigh down even a well-subscribed deal. For investors, the takeaway is to not be blinded by the subscription numbers alone – look at the bigger picture. If you had applied for Guming seeing 195× demand, you might have expected a jump; but savvy analysis (or grey market indication) might have warned that it could debut weakly. Having a plan to cut loss in such cases is vital. On the positive side, because it was oversubscribed, most retail investors got relatively few shares (the allocation per person might have been small), limiting absolute losses for individuals. But still, it’s money lost. Strategy-wise, one could have avoided this by noting the broader negative sentiment on bubble tea stocks – if several previous similar IPOs did poorly, that’s a sign to be cautious or skip.

Case Study 3: Top Education Group (2018) – Decent Start, Long-Term Lessons

About the IPO: Top Education Group (1752.HK) is an example outside of the bubble tea craze. It’s an Australian private university (education institute) that listed in Hong Kong in May 2018 – interestingly, one of the few foreign education companies to list in HK. The IPO price was HK$0.33 per share, and they raised about HK$207 millionamtdinc.comamtdinc.com. The deal had support from cornerstones like PwC (yes, the accounting firm took a stake, which was notable)amtdinc.comamtdinc.com. The retail portion was nearly 17× oversubscribedamtdinc.com – not sky-high, but solid. This resulted likely in a moderate clawback (probably retail got 20-30% of the shares). The environment in 2018 was fairly positive for IPOs in HK, though this was a small-cap listing.

Outcome: On its first trading day, Top Education’s shares closed about 20% higher than the IPO priceamtdinc.com. That’s a nice gain, though not explosive. It indicates the pricing was reasonable and demand was good enough to lift it. The IPO was considered successful – a 20% pop for a small cap is decent. In fact, the company touted the strong support from investors and was pleased with the receptionamtdinc.com. So in the short term, it was a successful IPO application for those who got shares – they made a profit if they sold at +20%.

However, let’s extend the lens: In the long run, Top Education did not perform well. Over the years after 2018, the company’s stock price trended down. Fast forward to late 2024, the share price was around HK$0.056markets.ft.com – which is an over 80% drop from the IPO price of 0.33. What happened? The education sector and the company’s growth likely didn’t meet market expectations. Perhaps the company’s financial performance didn’t excite investors, or simply small caps drifted down in a weaker market. This highlights that an IPO can have a fine debut, but long-term investors need to be careful. If you had held those shares from IPO for years, you’d be deep in the red, even though day-one flippers were up 20%.

Lesson: Top Education offers two insights: First, even a moderately oversubscribed IPO can give a nice initial return – you don’t need 100× demand to see a pop; 17× oversubscription with good cornerstone backing yielded +20% day oneamtdinc.com. So moderate enthusiasm + fair pricing = a respectable debut. Second, and more importantly, long-term success is not guaranteed by a good IPO debut. Investors should evaluate if the company has sustainable prospects. In this case, maybe the growth wasn’t there or the market lost interest, leading to a long slide. This case reinforces that if your strategy is flipping, Top Education was fine (flip and profit). If your strategy was to invest in the company long-term, you needed to continuously monitor the company’s results and possibly cut losses if things didn’t go well post-IPO. It reminds us that IPO investing and long-term investing can be very different games.

Additional angle: Top Education being an overseas company listing in HK also shows HKEX’s appeal to non-Chinese firms. From a process view, it had cornerstones (which gave some confidence), and it priced at a low absolute price (HK$0.33) enabling smaller retail investors to participate easily. The lesson there is also that low-price penny stock IPOs can pop or drop just like any other – sometimes retail likes cheap-looking stocks (0.33 felt like a bargain to some perhaps), but those can be volatile later.

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Summary of Lessons from the Three Cases:

• Mixue: When an IPO has extraordinary retail demand and strong fundamentals, it can vastly exceed expectations. These blockbuster IPOs can be very profitable, but they’re also hard to get an allocation. Use margin wisely in such cases and be ready to capitalize on the momentum, but don’t chase blindly after listing if valuation no longer makes sense.

• Guming: Don’t be seduced by oversubscription alone. Understand the context (sector sentiment, who is likely to sell). If an IPO is in a crowded or currently unloved sector, exercise caution. Also, if you do subscribe and the debut is weak, be ready to cut your losses quickly – things can worsen as flippers pile out.

• Top Education: A respectable IPO can still lead to a poor investment long-term. Take profits if that was your plan; if you hold, keep evaluating the company’s performance. Also, smaller IPOs can give decent percentage gains without needing insane oversubscription – so there are opportunities beyond the flashy big names, but you must be selective and also aware of their higher long-term risk.

Each IPO is unique. By studying past ones, you improve your intuition for future deals – knowing when to go big, when to be cautious, and when to walk away. IPO investing is a learning process, and even seasoned investors continue to learn from each new listing. Good luck with your own IPO investing journey in Hong Kong!