【Alternative Investment】To Tong: Hong Kong's new stocks become a preferred exit option for private equity last year, expected to continue into this year; Middle East war may impact capital flows

According to a report by the accounting firm, IPOs have become the preferred exit option for private equity last year. Michael Ma, Director of Consulting at CICC Hong Kong, stated that the revival of Hong Kong’s IPO exit mechanism is strengthening market liquidity, narrowing valuation gaps, and promoting a positive fundraising cycle, with momentum expected to continue until 2026.

He pointed out that Hong Kong’s IPO market rebounded strongly last year, with the median price-to-earnings ratio rising from 12x to 19x, indicating that investor confidence has rebounded despite geopolitical challenges. In contrast, stricter IPO regulations in mainland China have prompted issuers to turn to alternative exit methods such as mergers and acquisitions, equity transfers, and buybacks.

Hong Kong’s IPO strength is expected to continue

Last year, Hong Kong’s public offering fundraising exceeded twice the amount compared to the previous year. Ma noted that issuers with local growth potential and global appeal are seizing the opportunity to diversify financing channels and establish more sustainable capital sources.

Tung Biao, Managing Partner and Head of Consulting at CICC Hong Kong, estimates that Hong Kong’s IPO market can maintain last year’s momentum. The increasing demand for “A+H” listings, continued listings of tech companies in Hong Kong, and the launch of the Hong Kong Stock Exchange’s Tech 100 Index covering six frontier industries are expected to benefit the development of the IPO market.

SpaceX’s successful listing could serve as a model for high-tech companies

Regarding private equity in Asia, he said that the private equity market in the Asia-Pacific region, including mainland China, has been gradually recovering last year. Positive factors include ongoing investments in semiconductors, electric vehicles, artificial intelligence (AI), and robotics, as well as relaxed listing restrictions. Tech and AI-related companies raising funds in Hong Kong also present opportunities for private equity exits in mainland China.

He pointed out that if Elon Musk’s rocket and satellite company SpaceX successfully goes public, it would boost confidence in the AI and high-tech sectors and provide lessons for mainland high-tech industries on fundraising, listing, and M&A activities.

War may shift capital flows to India, Japan, and Southeast Asia

However, he admitted that macroeconomic challenges remain, especially with the uncertain US-China relations, and tariffs could influence cross-border transactions and valuations. Additionally, the recent escalation of tensions in the Middle East may impact capital flows. If the conflict expands, global funds might shift toward India, Japan, and Southeast Asia.