To The Moon

So far in 2025, Hong Kong’s IPO market seems to be experiencing a notable resurgence. This year has brought back investor excitement, with nearly half of new listings closing higher on their debut. Auntea Jenny surged over 50% on its first trading day, Bawangchaji climbed 15%, and Bluecircle jumped 40%—marking a string of strong IPO debuts that are catching investors’ attention.

AUNTEA JENNY (02589)

Meanwhile, the Hong Kong dollar (HKD) has also strengthened, with the Hong Kong Monetary Authority (HKMA) attributing this to increased demand for HKD-denominated assets—particularly equities. The correlation between rising IPO activity and HKD strength suggests a revival of investor confidence in the city’s capital markets.

But while the numbers are flashy, the question remains: Does a strong IPO debut mean it’s time to jump in?

Why I’m Sitting Out—for Now?

Despite the buzz, I remain cautious. Even though many recent IPOs in Hong Kong have posted strong opening-day performances, I personally am not more inclined to jump into these listings. Here’s why:

1. IPOs Are Inherently Risky

Historically, IPOs are among the more volatile investment choices. Prices can surge rapidly due to hype and speculative momentum—but just as easily, they can reverse. Many IPOs experience a "honeymoon phase" that fades once the broader market begins to price in fundamentals.

Since IPOs lack a trading history, it's harder to assess valuation norms or identify price support levels. There’s no past performance chart to fall back on, and technical indicators tend to be less reliable. Without that historical context, I find it difficult to gauge whether a stock is overbought or underpriced after its debut.

2. Lack of Familiarity with Companies

As someone who isn’t a Hong Kong citizen or resident, I’m not deeply familiar with many of these newly listed companies. Names like Auntea Jenny or Bawangchaji might be household names locally, but they don’t carry the same brand recognition or consumer visibility globally.

This unfamiliarity extends beyond just brand names—it includes understanding the business model, market landscape, and competitive positioning of these firms. Without strong insights into how these businesses operate and grow, I’m hesitant to commit capital.

3. Macroeconomic Context: High Interest Rates

Interest rates remain elevated globally, which makes risk assets like equities less attractive compared to safer instruments. With savings rates, and money market funds still offering solid returns, I’m less willing to allocate large sums to IPOs—especially those in unfamiliar markets.

In higher-rate environments, investors have to be more selective, as the opportunity cost of holding volatile growth stocks increases. This makes speculative IPO entries even harder to justify, no matter how well they perform on day one.

Beyond Day-One Gains: The Bigger Picture

While first-day pops grab headlines, long-term performance is often mixed. In both Hong Kong and global markets, it's not uncommon for IPOs to retreat weeks or months after listing—once early excitement fades and fundamental questions emerge.

There’s also the risk of hype driving valuations well above fair value, only for reality to catch up once quarterly earnings are reported or growth slows.

The Role of Sentiment and Liquidity

The surge in IPO performance this year may be fueled by improving sentiment in the Hong Kong market. But sentiment can be fragile. If macro conditions worsen, the rally could reverse just as quickly. IPO performance is often a reflection of short-term optimism, not necessarily a reliable signal of long-term opportunity.

Final Thoughts: Watching, Not Chasing

For now, I prefer to take a wait-and-see approach. I'm happy to watch this new IPO boom unfold from the sidelines while keeping a list of interesting companies that I might revisit once they have more of a track record.

A strong debut doesn’t always equal a strong investment. While I acknowledge that many investors have made quick profits in this environment, I’m staying focused on my own strategy: prioritizing familiarity, and capital preservation in a high-interest rate environment.

If these newly listed companies prove themselves over time—with earnings reports, stable performance, and clearer business models—I might reconsider. But until then, I’ll keep observing the Hong Kong IPO wave as an interesting market trend, not an invitation to jump in blindly.