Regulatory tightening has changed the logic of Hong Kong IPO practices. Investment banks are cutting reserves, withdrawing projects, and the era of product selection has arrived.

Ask AI · How tightening regulation is reshaping the practice logic of Hong Kong-listed equity investment banking

China Financial News (March 20, Reported by Zhao Xinrui) Is it about meeting Hong Kong regulatory compliance requirements or pursuing efficiency in expanding business? Recently, this debate has seen new developments. Currently, some investment banks have adjusted their projects to comply with regulations by reducing project reserves, while others have withdrawn from IPO filing projects.

As Hong Kong regulators continue to tighten IPO oversight, investment banks are adjusting their strategies, and a series of ripple effects are gradually emerging in the Hong Kong IPO market. According to market sources, under the strict regulatory environment, investment banks are formulating responses. Some are more cautious about taking on new IPO projects, even refusing certain high-risk IPOs. Others are ensuring compliance with Hong Kong’s rule that “each lead sponsor is responsible for no more than six active IPO projects,” by suspending IPO applications.

One industry analyst notes that stricter regulation in Hong Kong is forcing sponsors to proactively screen projects. As a result, the quality of practice and risk management standards among investment banks are continuously improving, and their practice logic is shifting toward “focusing on quality and compliance.”

Behind this change are quality issues exposed during the recovery of the Hong Kong IPO market. Since 2025, mainland Chinese companies have shown strong enthusiasm for listing in Hong Kong, with scenes of multiple gong strikes happening simultaneously in a single day. However, behind the market boom, the uneven quality of IPO documentation has become increasingly prominent, prompting regulatory attention and targeted rectification at year’s end.

Given current market trends and regulatory guidance, market participants are generally focused on two questions: Under a compliance-driven approach, what development directions should the Hong Kong IPO market prioritize? And how will these affect the total number of IPOs throughout the year?

Mainland Chinese investment banks exiting Hong Kong IPO projects

The ripple effects from increased scrutiny of Hong Kong IPOs are gradually influencing the business strategies of mainland Chinese investment banks. The withdrawal of some mainland Chinese banks from Hong Kong IPO projects has become a notable recent development.

According to announcements, in March, only one Hong Kong IPO candidate company issued a termination notice for its overall coordinator—Saimite for the Main Board IPO. On March 8, the company announced that it had reached an agreement with Citigroup Lyon and CITIC Jianxi International to terminate their roles as overall coordinators.

This termination attracted widespread market attention. The main reason cited in past cases where IPO sponsors terminated their roles was that the appointment period had expired and there was no renewal. However, Saimite’s announcement did not specify the reason for termination nor whether the appointment had expired.

Market speculation suggests that the withdrawal of these two mainland Chinese investment banks may be related to the Hong Kong Securities and Futures Commission’s restriction that sponsors’ core personnel can handle no more than five IPO projects simultaneously.

By comparison, another case earlier this year more closely aligned with industry norms. On February 24, Youlesai Share, planning to list in Hong Kong, announced that Huatai Financial Holdings’ role as overall coordinator had expired, and both parties agreed not to renew, thus ending Huatai’s coordinator role.

Industry insiders say that IPO projects submitted by leading brokerages before May this year have not been accepted by regulators, indirectly confirming that the withdrawal of mainland Chinese investment banks from Hong Kong IPOs is a proactive response to tightening regulation.

Under a focus on quality, whether more mainland Chinese banks will exit current IPO projects due to staff workload or project risks has become a key concern.

Hong Kong regulation intensifies, and brokerages face compliance tests

The continuous rise in compliance standards is making the Hong Kong IPO market face more rigorous challenges.

Recently, the Hong Kong Securities and Futures Commission (SFC) and the Independent Commission Against Corruption (ICAC) jointly conducted enforcement actions, searching the equity capital markets (ECM) departments of certain brokerages, targeting core activities such as IPO pricing and placement. This move has garnered widespread attention. Some industry insiders believe this marks a shift from the previous “external review” model, moving from document-focused checks to directly scrutinizing core business operations, indicating an escalation in Hong Kong’s IPO regulatory efforts.

This regulatory tightening, combined with recent efforts to further standardize the professional quality of IPO sponsors, has produced multiple impacts. Industry experts believe two main areas warrant attention.

First, the compliance boundaries of the Hong Kong ECM business chain will be further tightened under the joint enforcement. Whether the focus is on insider trading, placement arrangements, information flow, or abnormal trading behaviors, once regulators fully penetrate the ECM line, brokerages will face strengthened internal controls—such as information barriers, sensitive list management, project knowledge rights, and separation mechanisms across underwriting, execution, and sales stages. The level of detailed compliance management will be further enhanced.

Second, in this context, mainland Chinese brokerages’ investment banking activities in Hong Kong are under increased compliance pressure. In recent years, the volume of Hong Kong IPO projects handled by mainland firms has surged, bringing rapid growth but also compliance challenges. Internal risk controls, project execution quality, senior staffing ratios, and cross-department compliance segregation are all being raised. Objectively, the more projects a firm undertakes, the higher the likelihood of regulatory scrutiny.

From an industry impact perspective, the business models that relied on lax compliance and broad, unstructured execution will become unsustainable. Gray-area operations, short-term speculative activities, and low-quality project execution are likely to be the most directly affected sectors in this regulatory storm.

Industry analysts suggest that in the future, companies listing in Hong Kong will need to consider not only whether they can complete projects but also whether they have stable execution capabilities, clear compliance boundaries, mature ECM collaboration systems, and a robust underlying compliance framework capable of withstanding layered regulatory checks. As regulation intensifies, further industry reshuffling is expected.

Will the 2026 Hong Kong IPO volume meet expectations?

A series of regulatory adjustments has also prompted market attention on whether the overall IPO volume in Hong Kong for 2026 will be affected.

Multiple institutions’ forecasts for 2026 suggest that the number of new listings will generally range from 150 to 180, with total fundraising between HK$3.2 trillion and HK$3.5 trillion. The trend of A-share companies raising funds through Hong Kong will also continue.

Some industry insiders believe that, given the current shortage of qualified investment banking talent among mainland Chinese firms, the pace of new IPO projects in Hong Kong may slow, but project quality is expected to improve. Investment banks are shifting from “rushing to take projects” to “selecting projects.”

Recent remarks by HKEX management further confirm the regulator’s focus on quality. HKEX Chairman Tang Jiacheng recently emphasized that while increasing IPO numbers remains a goal, market quality will be prioritized. He stated that liquidity and trading volume are important, but market quality is more critical for attracting sustained investment. HKEX CEO Chen Yiting clarified that the SFC’s main concern is the quality of sponsor submissions, not the listing applicants themselves, setting clear boundaries for practice.

Some industry professionals suggest that, to balance market activity with application quality, future controls on the number of IPO filings in Hong Kong may be implemented. Overall, whether the total IPO count in 2026 fluctuates or not, “quality first” will remain the core principle throughout the year.

(China Financial News reporter Zhao Xinrui)