For the past two decades, Hong Kong has been mainland companies’ gateway and springboard to globalization. Investment from the mainland into Hong Kong is now 23 times what it was in 1997. More than 1,000 mainland companies are listed in Hong Kong – with a total market cap of two trillion US dollars, about two thirds of the market.

International access and free flow of capital put the Hong Kong stock market ahead of the mainland’s. But higher valuations are now luring some initial public offerings (IPOs) away from Hong Kong. Can the city keep its winning streak as the world's largest IPO market?

For many Chinese companies, a Hong Kong IPO is the first solid step in internationalization. But in recent years, big Hong Kong-listed Chinese companies have planned A-share backdoor listings, including big names like Evergrande, Wanda and Qingdao Port. They feel they're not getting the valuations they deserve.

“The Hong Kong market is dominated by institutional investors and international investors. They are more skeptical about Chinese companies, corporate governance, their financial statements etc, so they usually give lower valuation to A-shares,” said Daniel So, a strategist for China Merchants Bank International Securities.

This valuation gap is not likely to narrow any time soon, even after Morgan Stanley Capital International's (MSCI) inclusion of A-shares.

Besides, tech companies worldwide have noted Hong Kong’s ban on multiple share class structures, which led to only 3 percent of tech companies on the market last year. This also made Hong Kong miss some of the high-profile IPOs in recent years. But Francis Lun, CEO of GEO Securities, said it did not mean the city was no longer attractive for listed businesses.

“Hong Kong has been the leader in IPO money raising for the past two or three years," according to Lun. "The big one that we missed is Alibaba. Now the stock exchange is launching the third and fourth boards, specifically aiming at different voting right shares and different classes of shares. With this in place, I think Hong Kong stands a good chance of winning back those internet giants that are listed in the US like Alibaba, JD and Baidu.”

Besides, although the A-shares market is getting more international exposure, Hong Kong still remains uniquene for its rule of law and free market.

“For A-shares, in the past few years, we witnessed that there were more interventions especially when the market was not doing well. The market isn’t opened up yet, no free conversion of currency RMB, so for international investors, there are still a lot of limitations. And when they want to get out, they would face difficulties, but in Hong Kong there are no such obstacles,” said So.

These existing advantages and new improvements would put Hong Kong's IPO market ahead of the game, but given how many mega companies are already listed, IPO volumes are unlikely to hit pre-crisis levels.