Regulatory Tightening: Hong Kong IPO Practice Logic Shifts as Investment Banks Cut Reserves and Exit Projects, Selectivity Era Arrives

Is it compliance with Hong Kong regulations or pursuit of business efficiency? This debate has recently seen new developments. Currently, some investment banks are aligning with regulatory requirements, reducing project reserves, and others have withdrawn from IPO filing projects.

As Hong Kong regulators continue to tighten IPO oversight, investment banks are adjusting their business strategies, and a series of ripple effects are gradually emerging in the Hong Kong stock IPO market. According to market sources, under the strict regulatory environment in Hong Kong, banks are developing plans to respond. Some are more cautious when taking on new IPO projects, even refusing high-risk IPOs. Additionally, to meet Hong Kong’s quantitative requirement that “each main sponsor is responsible for no more than 6 active IPO projects,” some are choosing to suspend IPO applications.

Some industry analysts interpret that the tightening regulations in Hong Kong are forcing sponsor institutions to proactively screen projects. The quality and risk control standards of investment banks are continuously improving, and their operational logic is shifting toward “focusing on quality and compliance.”

Behind this shift are quality issues exposed during the recovery of the Hong Kong IPO market. Since 2025, Chinese companies have shown great enthusiasm for listing in Hong Kong, with some days seeing multiple IPOs simultaneously ringing the bell. However, behind the market boom, the uneven quality of IPO documents has become increasingly prominent, prompting regulatory attention and rectification at the end of the year.

Considering current market trends and regulatory guidance, market participants are generally focused on two questions: Under compliance requirements, what development directions should the Hong Kong IPO market focus on? And how will this impact the total number of IPOs throughout the year?

Some Chinese investment banks have exited Hong Kong IPO projects

The tightening of Hong Kong’s IPO review process has triggered a chain reaction that is gradually affecting Chinese investment banks’ business expansion. The withdrawal of some Chinese banks from Hong Kong IPO projects has become a notable recent change.

According to announcements, in March, only one Hong Kong-listed IPO candidate, SaiMeiTe, announced the termination of its overall coordinator. On March 8, the company announced that it had reached agreements with CITIC Lyon and CITIC Construction International to terminate their roles as overall coordinators.

This termination drew widespread attention. The main reason cited in past cases of IPO project coordinator termination was usually the expiration of the appointment period or mutual non-renewal. However, SaiMeiTe’s announcement did not specify the reason for termination or whether the appointment had expired.

Market speculation suggests that the withdrawal of these two Chinese investment banks may be related to the Hong Kong Securities and Futures Commission’s (SFC) limit of no more than five IPO projects per sponsor personnel.

In comparison, another case of termination earlier this year aligns more with industry norms. On February 24, UleShare, planning to list in Hong Kong, announced that because the appointment of Huatai Financial as overall coordinator had expired and both parties agreed not to renew, Huatai’s role was terminated.

Industry insiders reveal that some leading securities firms’ IPO projects filed before May this year have not been accepted by regulators, further confirming that Chinese investment banks’ withdrawal from Hong Kong IPOs is a proactive adaptation to stricter regulation.

Under the focus on quality, whether more Chinese investment banks will withdraw from current Hong Kong IPO projects due to personnel load or project risks remains a key market concern.

Hong Kong regulators intensify oversight, and brokerages face compliance tests

The continuous rise in compliance standards is placing the Hong Kong IPO market under stricter scrutiny.

Recently, the Hong Kong Securities and Futures Commission (SFC) and the Independent Commission Against Corruption (ICAC) jointly conducted enforcement actions, searching the stock capital markets departments (ECM) of some brokerages, targeting core activities such as IPO pricing and placement. This move has attracted widespread attention. Some investment banks believe this regulatory shift marks a move away from the previous “external review” model, shifting focus from document review to core business operations, indicating an escalation in Hong Kong’s IPO oversight.

The increased regulation, combined with further standardization of sponsor professionals’ quality, has several implications. Industry experts highlight two key areas to watch:

First, the compliance boundaries of the Hong Kong ECM business chain will tighten further under joint regulatory actions. Whether the focus is on insider trading, placement arrangements, information flow, or abnormal trading behaviors, once regulators penetrate the ECM business line, internal information barriers, sensitive list management, project knowledge permissions, and the segregation of roles in underwriting, sales, and execution will be reinforced, further refining compliance controls.

Second, Chinese brokerages’ IPO activities in Hong Kong face greater compliance pressure. In recent years, the volume of Hong Kong IPO projects undertaken by Chinese brokerages has surged, bringing compliance challenges. Internal risk control systems, project execution quality, experienced personnel ratios, and cross-department compliance segregation are all under increased scrutiny. The more projects undertaken, the higher the likelihood of regulatory focus.

From an industry perspective, the previous business model relying on lenient compliance and broad operational practices will become unsustainable. Gray-area operations, short-term speculative activities, and low-quality project execution are likely to be the most directly impacted areas in this regulatory storm.

Industry analysts suggest that future companies listing in Hong Kong will need to consider not only their ability to complete projects but also their stable project execution capacity, clear compliance boundaries, mature ECM collaboration systems, and underlying compliance frameworks capable of withstanding regulatory scrutiny. As oversight intensifies, further industry reshuffling in the Hong Kong IPO sector is expected.

Will the 2026 Hong Kong IPO volume expectations change?

A series of regulatory adjustments have also prompted market speculation about whether the overall IPO volume in Hong Kong in 2026 will be affected.

According to multiple industry assessments, the number of new listings in Hong Kong in 2026 is expected to be between 150 and 180, raising approximately HKD 3.2 trillion to HKD 3.5 trillion. The trend of Chinese companies raising funds through Hong Kong offshore listings is expected to continue.

Some industry insiders believe that, given the current shortage of qualified Chinese investment banks, the pace of new IPO projects in Hong Kong may slow, but project quality is likely to improve. Investment banks are shifting from “winning projects” to “selecting projects.”

Recent statements from HKEX management further confirm the regulator’s quality-oriented approach. HKEX Chairman Charles Li emphasized that while increasing IPO numbers is a goal, market quality is more important. He stated that liquidity and trading volume are important, but only a high-quality market can continuously attract capital, investors, and companies. HKEX CEO Catherine McGuinness also clarified that the SFC’s focus is on the quality of sponsor submission materials, not the listing applicants themselves. This clarifies the boundaries for investment banks’ operational focus.

Some investment banks suggest that, to balance market activity and IPO quality, future adjustments to the number of Hong Kong IPO filings may be necessary. Overall, whether the total IPO count in 2026 fluctuates or not, “quality first” will remain the core guiding principle throughout the year.

(Article source: Cailian Press)