To The Moon

The Hong Kong Stock Exchange ( $HKEX(00388)$ ) is stealing the global IPO spotlight in 2025, raising $12.8 billion in the first half, outpacing Nasdaq’s $7.6 billion and NYSE’s $7.0 billion. With 70-80% of recent Hong Kong IPOs proving profitable, investors from China to Singapore are jumping in, fueled by a surge in subscription interest. Sanhua Holdings, currently open for subscription, is a standout, aiming to raise HK$8.12 billion ($1.03 billion) with strong backing from global investors. But is this rush driven by fear of missing out (FOMO) or a calculated move? Should you dive into Hong Kong IPOs like Sanhua or chase U.S. IPOs like Circle? This report explores the drivers, risks, and opportunities to help you decide.

Hong Kong’s IPO Boom: What’s Driving It?

Hong Kong’s IPO market is on fire, with 17 deals raising HK$18.7 billion ($2.4 billion) in Q1 2025 alone, a fourfold increase from Q1 2024. The first half of 2025 saw $12.8 billion raised, reflecting robust investor confidence. Key drivers include:

• Regulatory Reforms: Enhanced listing procedures for A-share issuers and collaborations with Middle Eastern and ASEAN markets are attracting diverse companies.

• China’s Economic Recovery: Stimulus measures and a rebounding economy are boosting mainland firms’ listings, with companies like CATL applying for HKEX listings.

• Global Investor Interest: The HKEX’s 144% jump in average daily turnover to HK$243 billion in 2025 signals strong liquidity and investor appetite.

• Sector Strength: Technology (41%), life sciences, and consumer brands dominate, offering diverse opportunities.

Sanhua Holdings, a refrigeration and automotive component maker, exemplifies this trend. Its IPO, set to begin trading on June 23, 2025, aims to raise HK$8.12 billion by offering 360.3 million shares at HK$21.21-$22.53 each. With 17 cornerstone investors, including GIC and Schroders, committing $562 million, Sanhua’s poised for a strong debut.

Sanhua Holdings: A Closer Look

Sanhua Holdings, officially Zhejiang Sanhua Intelligent Controls Co., Ltd., is a Shenzhen-listed firm with a robust track record. In 2024, it reported revenue of 28 billion yuan ($3.9 billion), up 13.8% year-over-year, and net profit of 3.1 billion yuan, up 6.1%. Its products—valves, heat exchangers, and auto parts—are used in air conditioning, refrigeration, and automotive thermal management, tapping into global demand for energy-efficient solutions.

Why Sanhua Stands Out

• Strong Financials: 13.8% revenue growth and 6.1% profit growth in 2024, with Q1 2024 sales up 13.4% to 6.44 billion yuan.

• Strategic Use of Proceeds: 30% for product development, 30% for capacity expansion, and the rest for digital infrastructure and working capital.

• Investor Backing: $562 million from cornerstone investors signals confidence.

• Market Positioning: Sanhua’s focus on HVAC and automotive aligns with global trends toward sustainability and electrification.

Risks to Consider

• Valuation Concerns: At the top end of its IPO range ($22.53), Sanhua’s valuation is ~20x forward P/E, higher than peers like Gree Electric (15x).

• Geopolitical Risks: U.S.-China trade tensions could impact its international expansion.

• Market Volatility: HK IPOs are prone to post-debut swings, as seen with Circle’s 240% surge followed by a pullback.

Sanhua’s fundamentals and investor support make it a compelling pick, but its high valuation and external risks warrant caution.

Hong Kong vs. U.S. IPOs: Where’s the Value?

Hong Kong will weather tariff storm, finance chief says, touting 'brisk' IPO market | South China Morning Post

Hong Kong’s IPO market is outperforming its U.S. counterparts in 2025, raising $12.8 billion in H1 compared to Nasdaq’s $7.6 billion and NYSE’s $7.0 billion. The 70-80% profitability rate of recent HK IPOs reflects strong investor demand and market stability. Key sectors include:

• Technology: AI-driven firms like QuantumPharm, which raised HK$990 million under new Chapter 18C rules.

• Life Sciences: Biotech companies leveraging Hong Kong’s regulatory flexibility.

• Consumer Brands: Firms like Guming Holdings, raising HK$1.8 billion.

U.S. IPOs, like Circle’s 240% post-IPO surge, are often tied to speculative sectors like crypto, offering high rewards but also high volatility. Hong Kong’s IPOs, by contrast, benefit from China’s economic rebound and regulatory support, making them a more stable bet for 2025.

Comparison Table: HK vs. U.S. IPOs (H1 2025)

FOMO or Smart Play?

The rush into Hong Kong IPOs isn’t pure FOMO—it’s backed by strong fundamentals and market momentum. The 70-80% profitability rate and $12.8 billion raised in H1 2025 suggest real value, especially for companies like Sanhua Holdings. However, IPOs are inherently volatile, and overpaying in a frenzy could lead to losses. The key is selective investing—focus on firms with solid financials and growth potential.

U.S. IPOs, while offering high returns (e.g., Circle’s 240% gain), are riskier due to speculative sectors and regulatory uncertainty. Hong Kong’s stability, driven by China’s economic recovery and regulatory reforms, makes it a smarter play for 2025, particularly for investors with access to subscriptions, like those in Singapore.

Should You Participate?

Hong Kong IPOs (Sanhua Holdings):

• Pros: Strong fundamentals, investor backing, and a booming market. Sanhua’s 13.8% revenue growth and $562 million in commitments make it a top pick.

• Cons: High valuations and post-IPO volatility could lead to pullbacks. A dip to $20-$21 post-debut could be a better entry point.

• Strategy: Subscribe to Sanhua’s IPO if you can, but consider selling 50% on a 20-30% debut pop to lock in gains, holding the rest for long-term growth.

U.S. IPOs (Circle):

• Pros: High upside potential, as seen with Circle’s 240% surge, driven by crypto and stablecoin hype.

• Cons: Volatility and regulatory risks make U.S. IPOs riskier than HK counterparts.

• Strategy: Wait for a post-IPO dip in Circle to $90-$100 before buying, targeting $120.

My Pick: Sanhua Holdings

I’m bullish on Sanhua Holdings for its strong financials, strategic growth plans, and alignment with global trends in HVAC and automotive electrification. Its $1.03 billion IPO, backed by $562 million from cornerstone investors, signals robust demand. I’d participate in the HK IPO, aiming for a 20-30% debut gain, then trim half my position to secure profits and hold the rest for a $25-$30 target by year-end. For U.S. IPOs, I’d pass on Circle’s volatility and wait for a better entry point.

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📝 Disclaimer: This post is for informational purposes only and does not constitute financial advice. Always conduct your own research before making investment decisions.

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