I. What are Hong Kong IPOs?
Hong Kong IPOs refer to investors participating in the subscription of newly listed stocks in the Hong Kong market.
When a company goes public through an IPO, investors can subscribe to new shares, and if they win, they have the opportunity to sell for profit on the first day of listing or in dark pool trading.
Compared to A-share IPOs, Hong Kong IPOs have three core advantages:
No threshold: no need for a minimum market value, as long as there is cash in the account, participation is possible;
High winning rate: the winning rate for one hand often reaches single digits to 100%, with popular stocks even at 100% (like 2024 Mao Ge Ping with a 100% winning rate for one hand);
Leverage support: brokers offer a maximum of 10 times margin financing for subscriptions, allowing small funds to amplify shares and increase winning probability.
II. How to participate in Hong Kong IPOs?
1. Open a Hong Kong stock account
You need to open an account through a licensed broker in Hong Kong (like Futu, Changqiao, etc.), the online process takes about 10 minutes.
Note: A-share Hong Kong Stock Connect cannot participate in IPOs; a separate Hong Kong stock account must be opened.
2. Apply for a Hong Kong bank card
A Hong Kong bank card is essential for fund transfers; recommended banks that support online applications include Bank of China, HSBC, and ZhongAn, you need to prepare ID, Hong Kong and Macao travel permits, etc.
3. Fund the account
Funds can be transferred via bank-to-broker transfer (supported by a few brokers), eDDA (instant deposit), or FPS (proof of payment required), it is recommended to deposit over 10,000 Hong Kong dollars initially to receive broker rewards to cover handling fees.
4. Subscribe to new stocks
Check the prospectus information in the 'New Stock Center' on the broker's app, choose cash or margin subscription, and after submitting the order, funds are frozen, and the amount is automatically deducted upon winning.
III. Core rules for Hong Kong IPOs
1. Key time points
Subscription period: usually 3-4 days, applications must be submitted during this period;
Pricing day: the final issue price is determined after the subscription deadline;
Dark pool trading: one trading day before listing from 16:15 to 18:30 (over-the-counter trading, price movements indicate the first day’s trend);
Listing day: the first day of trading, with no limits on price fluctuations.
2. Winning mechanism
One account, one subscription: repeating applications across different brokers will lead to disqualification (strictly enforced after the FINI system is activated);
Red shoe mechanism: ensures at least one hand for retail investors, and remaining shares are distributed proportionally (the more you subscribe, the lower your winning rate per hand) (note this refers to the winning rate per hand, the overall winning rate for more subscriptions = this tier's winning rate per hand * number of subscriptions).
3. Fee explanation
Cash subscription: free
Margin subscription: 100 Hong Kong dollars handling fee + margin interest (most brokers waive margin interest).
A transaction fee of 1.0085% is charged after winning.
4. Group A and B division
Group A (subscription ≤ 5 million Hong Kong dollars) primarily consists of retail investors, as the winning rate for new Hong Kong stocks tends to skew towards retail investors, hence the winning rate is relatively high.
Group B (subscription > 5 million Hong Kong dollars) consists of large investors/institutions and can leverage for a sprint.
Groups A and B each account for half of the shares.
5. Allocation mechanism:
Public offering (this is our broker's IPO subscription): 10% (initially)
International placement (offline, large funds, cornerstone investors, funds, etc.): 90% (initially)
The actual number of shares allocated for public offering is adjusted based on the oversubscription multiple (the pie becomes larger):
Oversubscription below 15 times: public offering accounts for 10%.
Oversubscription 15-50 times: reallocation to 30%.
Oversubscription 50-100 times: reallocation to 40%.
Oversubscription above 100 times: reallocation to 50%.
The subscription multiple is an important reference indicator for Hong Kong IPOs.
Subscription multiple = actual total subscription amount from retail investors ÷ originally intended share allocation for public offering,
Relevant data can be referenced from Jieli Trading Treasure, Hong Kong Stock Exchange's official disclosure.
The larger the subscription multiple, the more excited the market sentiment, and the relative risk of breaking below is smaller.
However, reallocation will lead to a higher winning rate, and the price increase on the first listing day may be limited.
Just because the public subscription multiple is high, does not guarantee that it will 'definitely' rise on the first day, but historical data shows that a high public subscription multiple likely leads to a rise on the first day; among the top 10 IPOs ranked by subscription multiple, only one has dropped. So no matter how you analyze fundamentals and other indicators (most publicly available materials online are copies), the public subscription multiple is very important.
6. Green shoe mechanism
If the new stock breaks below, the underwriter can use excess placement funds to support it;
If it skyrockets, they can issue 15% more shares to curb the overheating (refer to Xiaomi, Meituan cases).
In simple terms — newly listed stocks are prone to 'motion sickness', and the green shoe mechanism acts like a stabilizing device for the car, making the stock price ride a bit more smoothly, but how far the car can go still depends on the engine (company strength).
7. Sponsors and cornerstone investors
Sponsor: a securities intermediary institution registered with regulatory authorities (usually a comprehensive securities company), responsible for recommending companies for listing and ongoing supervision.
Cornerstone investors: large institutional investors or corporate groups that sign agreements before the IPO, committing to subscribe for shares at the issue price.
Let’s take a closer look at the responsibilities of sponsors:
1. Injecting confidence into the market through locked funds (usually 6-12 months)
2. Stabilizing the issue price and reducing the risk of breaking below
3. Often sovereign wealth funds, industrial capital, or local state-owned asset platforms (like Nanshan Investment, Yizhuang International Investment, etc.)
Therefore, Goldman Sachs and Morgan Stanley have a low rate of projects breaking below at 15%; endorsements from cornerstone investors like Tencent and Sequoia can reduce risks.
IV. Summary
Hong Kong IPOs ≠ guaranteed profits, but mastering the rules + choosing the right strategy + controlling risks = high probability of making gains
Hong Kong IPOs are a matter of complexity; they can be difficult or simple.
What is difficult?
You need to understand a bit about the company’s quality: for example, what the company does, whether it is profitable, you don't need to be very precise, but at least have a rough judgment.
A bunch of incomprehensible terms: such as 'margin financing' (borrowing money for IPO), 'Group A and Group B' (grouping based on amount of money), 'dark pool' (trading secretly before listing), these terms need to be learned slowly.
Guessing the winning rate: you need to study the enthusiasm of everyone borrowing money for IPOs (for example, 'margin multiple'), and also look at how many shares are allocated to retail investors, this takes experience to figure out.
What is simple?
Just focus on one number: the enthusiasm for borrowing money for IPOs (margin multiple)! Large-cap stocks (like big companies such as Mixue Ice City): if everyone’s enthusiasm for borrowing money for IPOs exceeds 500 times, it indicates a frenzy, following the trend is likely to make profits.
Small-cap stocks (like obscure small companies): enthusiasm must soar above 1000 times to be considered hot, at this point, jumping in with closed eyes often leads to profits.
In simple terms: where there are more people, that’s where to crowd in; the higher the enthusiasm, the more aggressively to bet, straightforward but effective.
However, be aware: although this trick is simple, it is not guaranteed profit. For example, last year, Mixue Ice City had over 5000 times subscription, skyrocketing on the first day, but some small-cap stocks with high enthusiasm ended up losing (like Nayuki).
So it’s best to combine the company’s industry and market sentiment before making a move; don’t just look at the excitement. In short, IPOs are a probability game, invest heavily in companies with high certainty, and give up on those with low certainty. Although there will be losses in between, the overall trend is still profitable.