Hong Kong stocks stage strong rebound as capital confidence revives, backed by the Chinese mainland's steady economic growth

Editor's note: Liu Chunsheng is an associate professor at the Beijing-based Central University of Finance and Economics. The article reflects the author's opinions and not necessarily the views of CGTN.

In the first half of 2025, the Hong Kong stock market showed a remarkable recovery. The number of initial public offerings (IPOs) rebounded significantly and the fundraising scale achieved leapfrog growth, becoming a bright spot in the global capital market. In the first half of the year, Hong Kong Stock Exchange successfully completed more than 40 IPOs, with a total fundraising amount exceeding 100 billion HK dollars ($12.74 billion). Behind this is the collaborative efforts of multiple sectors, including technology, new energy, and retail.

Significance of the Hong Kong stock market

The Hong Kong stock market is vital to both the Chinese mainland and the Hong Kong Special Administrative Region. For the mainland, it offers a key financing channel, aiding enterprises, especially those in emerging industries, to secure funds for growth. It helps boost the global influence of the mainland enterprises, facilitating their overseas expansion and enhancing their global industrial chain. It drives industrial upgrade by supporting emerging sectors and transforming traditional ones. It acts as a risk buffer for the mainland capital market during global financial turbulence, and advances renminbi (RMB) internationalization via more RMB-denominated products and transactions. For Hong Kong, it consolidates its status as an international financial center by attracting global enterprises and investors, with major firms like Tencent listed here. It fuels related industries such as finance and law, creating jobs, promoting economic diversification beyond finance and real estate, and increasing fiscal revenue through stamp duties and listing fees, benefiting public services.

Drivers behind recovery of the Hong Kong stock market

The recovery of the Hong Kong stock fundraising has been underpinned by multiple deep-seated factors that are intertwined with each other. The mainland's capital market reforms have played a pivotal role, with policies enhancing transparency, standardization, and internationalization. They have provided a solid institutional foundation for Hong Kong to adapt to global market changes and attract high-quality enterprises.

Complementing this, reforms to the Hong Kong Exchanges and Clearing Limited's (HKEX) listing mechanism have injected fresh vitality into the market. By streamlining rules to lower entry thresholds, simplifying procedures, and enhancing efficiency, exemplified by the weighted voting rights system, HKEX has created more accessible channels for innovative tech firms to secure funding and achieve rapid growth.

Against the backdrop of RMB internationalization, Hong Kong's significance as the world's largest offshore RMB market has grown increasingly prominent. As RMB gains traction in global trade, international investors seeking RMB assets to tap into the mainland's economic dividends are turning to Hong Kong stock market as a preferred platform, facilitating easier investment in the mainland enterprises and enabling diversified asset allocation.

Simultaneously, the Chinese mainland enterprises' growing demand for diversified "going global" financing has strengthened Hong Kong's appeal. As the mainland's economic globalization accelerates, Hong Kong – as an international financial hub with robust systems, diverse products, and professional services – offers comprehensive support. Listing here not only secures funds but also enhances enterprises' global visibility, laying a solid groundwork for overseas expansion. These interconnected factors have collectively driven the prosperity of Hong Kong's stock market.

Future outlook of the Hong Kong stock market

The Hong Kong stock market is poised to sustain its positive trajectory, with its influence in global capital markets set to grow, fueled by multiple favorable dynamics. The mainland's steady economic expansion will strengthen its enterprises, drawing more high-quality firms, especially in emerging sectors like AI, quantum computing, and bio-manufacturing, to list in Hong Kong. This will further enrich investment options and attract greater investor interest.

Institutional advancements will reinforce this momentum. Further refinements to the Chinese mainland's capital market framework and HKEX's ongoing innovation in listing mechanisms, including rule improvements to accommodate diverse enterprises and stricter oversight, will enhance market credibility and better protect investors.

Global capital will keep flowing into Hong Kong as they seek exposure to the Chinese mainland assets. International investors are being drawn to the Chinese mainland's growth, its large market, and improving business environment. This trend supports RMB internationalization. Hong Kong is expanding RMB-denominated products and seeing more RMB use in stock trading. These steps will strengthen its global market role and cement its position as the top offshore RMB hub.

Regional synergy will deepen through the Guangdong-Hong Kong-Macao Greater Bay Area, with closer ties between Hong Kong and the mainland capital markets, via enhanced financial product integration, investor connectivity, and regulatory collaboration, fostering complementary growth and elevating China's overall capital market competitiveness.

Challenges persist, however. Global economic uncertainties, including geopolitical tensions, trade frictions, and shifts in major economies' monetary policies, could impact the market. Intensifying competition from other financial hubs also requires Hong Kong to keep enhancing its appeal through robust risk management, strengthening early warning systems and cross-border oversight and sustained financial innovation to meet evolving market needs.

By leveraging its unique strengths as a bridge between the Chinese mainland and the world, Hong Kong is set to facilitate capital flows, drive economic growth, and contribute further to the mainland's development and its own long-term prosperity, These collective efforts are paving the way for an even brighter future.