A Glimpse into the Hong Kong Stock Market
Recently, we have held two consecutive investor meetings for different funds to report and share the latest developments of the funds with our investors. During the meetings, some investors raised concerns about Hong Kong stocks breaking their issue prices. Therefore, Haoyue Capital is here to share with you the discussion and analysis of the reasons for Hong Kong stocks breaking their issue prices since 2022, and the performance of Hong Kong stocks from 2025 to the present
Background: Since 2022, the Hong Kong stock market has gone through a highly challenging period, with significant fluctuations in the Hang Seng Index and a notable cooling of the initial public offerings (ipos). During this period, there have been a large number of cases where shares have fallen below the issue price after listing.
The main reason for the large number of stock price breaks in Hong Kong is not due to a single factor, but rather the result of "unfavorable timing, favorable location and favorable people".
It is a complex issue that is the result of the combined effects of macro environment, market sentiment, industry cycle and the company itself.
Macro environment and market sentiment
Global monetary policy tightening: To combat high inflation, the Federal Reserve and many central banks have embarked on an aggressive rate hike cycle since 2022; This has led to:
Liquidity tightening: Global capital flowing back from emerging markets (including Hong Kong) to developed markets such as the United States, the Hong Kong stock market as a whole is under pressure, and the Hang Seng index continues to decline.
Valuation pressure: Interest rate hikes have led to a rise in risk-free rates and an increase in the discount rate for future cash flows, which has dealt a heavy blow to the valuation logic of growth and technology stocks. Many new economy companies fall into this category, and their offering prices may not reflect this change in time, and they will naturally not be able to hold up after going public.
Geopolitical and economic uncertainties: Sino-US relations, the Russia-Ukraine conflict, concerns over a slowdown in global economic growth, etc., have all intensified market risk aversion, with investors tending to avoid risks rather than chase high-risk new stocks.
Liquidity problems in the Hong Kong local market: Liquidity in the Hong Kong stock market is weaker compared to A-shares and US stocks. When market sentiment is low, a small amount of selling can lead to a sharp drop in share prices, and new stocks are more likely to break down due to a lack of buying support.
Industry and company factors
Industry cycle downturn
In 2022, previously highly sought-after sectors such as technology Internet, biomedicine (Class B shares), and new energy vehicles entered a period of deep adjustment:
Technology stocks: Affected by antitrust regulation and slower earnings growth.
Biopharmaceutical stocks: Global Biotech sector investment is waning, especially for revenue-deficient R&D companies.
New energy vehicle stocks: The market competition is extremely fierce, losses continue, and investors are worried about their profit prospects.
The offering prices set by companies in these sectors at the peak of the industry may no longer be recognized by the market by the time they go public.
Overvaluation pricing (core reason)
Many companies set their IPO prices too optimistically and fail to fully consider changes in the market environment. Investment banks, companies and early investors wanted to raise funds at a higher valuation, but secondary market investors thought it wasn't worth the price and voted with their feet, causing it to fall below the issue price.
"Introduction listing" is on the rise: An introduction listing is a way of going public without issuing new shares or raising new funds. Companies introduce a portion of their shares that have been issued and listed on another exchange, such as the US stock market, into the Hong Kong Stock Exchange, allowing these shares to be traded simultaneously on both markets.
Such companies as NIO and Beike do not involve new share financing through an introduction listing. This approach itself has no new funds to support the share price, which is entirely determined by supply and demand in the secondary market and is more likely to directly follow the fluctuations of its US stock price, resulting in a break below the issue price.
Lack of fundamental support: Some listed companies have weak profitability or have not yet found a clear profit model. They have a good story when the market is good, but when the market is cautious, their fundamental flaws are magnified and cannot support their valuation.
Market mechanisms and investor structure
Institutional investor dominance: The Hong Kong stock market is dominated by institutional investors, who are more rational, conduct in-depth research, and are less likely to pay for overvaluation. If the pricing is not reasonable, it will be sold off after listing.
"Cornerstone Investor" mechanism: Cornerstone investors typically have a six-month lock-up period. During a market downtrend, once the lock-up period ends, there may be huge selling pressure, causing the share price to fall further.
Some well-known cases of Hong Kong stock listings breaking their issue prices (2022-2025)
Here are some representative cases that come from different industries and have different focuses on the extent and causes of the breakdowns:
1. Zhihu (02392.HK) - Dual Primary Listing
Offering price: HK $51.80
Performance: It plunged sharply on its first day of trading and closed down more than 23%. The current share price is still far from the offering price.
Company Background: China's leading online Q&A community.
2. Nio (09866.HK) - Introduction to Listing
Opening price on first day of listing: HK $160 (reference price)
Performance: Despite the introduction listing (no financing), it opened below the issue price on the first day of trading and dropped by more than 11% at one point.
Company Background: China's high-end smart electric vehicle manufacturer.
3. Tianqi Lithium (09696.HK) - Dual primary listing
Offering price: HK $82
Performance: The stock broke on its first day of trading and closed down more than 3 percent, followed by a sharp decline at one point.
Company Background: A leading global supplier of core materials for lithium battery new energy.
4. Baide Medical (06678.HK) - Relisting after failed initial public offering
Offering price: HK $1.40 (adjusted)
Performance: The listing process was full of twists and turns, and the final performance was weak after listing, quickly falling below the issue price.
Company Background: Leading supplier of microwave ablation medical devices for minimally invasive tumor treatment in China.
5. Sunshine Insurance (06963.HK) - the first publicly traded private insurance group
Offering price: HK $5.83
Performance: Close to the issue price on the first day of listing, but soon below the issue price.
Company Background: A fast-growing private insurance services group in China.
6. Zero Run Auto (09863.HK
Offering price: HK $48
Performance: Plunged more than 33% on its first day of trading, setting a record for the biggest first-day decline in Hong Kong ipos that year.
Company Background: China Smart Electric Vehicle Company.
The widespread price breaks in Hong Kong stocks since 2022 are an inevitable result of the combined effects of "external cold winds" (global monetary tightening and economic downturn) and "internal heat" (issuers' overvaluation and pricing, industry cycle shift, and weak company fundamentals).
It reflects that in the new environment, the cognitive and expectation gap between the primary market (issue pricing) and the secondary market (investment trading) is being drastically rematched. For companies planning to go public, they need to be more cautious in choosing the timing of their listing and face the market with a more reasonable valuation.
Let's take a look at the innovative drug and medical device companies listed in Chapter 18A
The reasons for the breakdowns are combined with industry characteristics such as clinical data falling short of expectations, changes in the financing environment, and the impact of centralized procurement policies. Distinguish between common and individual causes, such as macro factors like Fed rate hikes affecting valuations, industry factors like competition and homogenization, and company issues like insufficient pipeline competitiveness;
Key risk points and assessment dimensions; Objectively speaking, a break-even does not mean the company is bad, but rather a reflection of market sentiment.
Since 2022, the biopharmaceutical and medical device sectors in Hong Kong's capital market have experienced an unprecedented "winter", with share prices falling below the issue price after listing almost becoming the norm. This phenomenon is the result of the combined effects of macro environment, industry cycle, policy pressure and the company's own factors.
Here are some representative biopharmaceutical and medical device companies that have broken their issue prices after going public, along with an in-depth analysis of the reasons for their breakdowns.
Some cases of companies breaking their issue prices (2022-2025)
There are many companies breaking their issue prices in this sector. Here are a few typical examples:
1. Biocytogen (Beijing) Pharmaceutical Technology Co., LTD. (02315.HK)
Date of listing: September 1, 2022
Offering price: HK $25.00
Performance: The stock price broke through the issue price on its first trading day and closed down by more than 6%. Subsequently, the stock price remained sluggish.
Business: A clinical-stage biotech company based on gene editing technology and focused on new drug development. With major initiatives such as "Thousand Mice, Ten Thousand Antibiotics".
2. Lepu Biotech Co., LTD. (02157.HK)
Listing date: February 23, 2022
Offering price: HK $7.13
Performance: The stock broke on its first day of trading and closed down nearly 1 percent from the issue price.
Business: Focused on the development of immunological drugs such as antibody-drug conjugates (ADCs) and PD-1/PD-L1 for oncology treatment.
3. Shanghai Microport Brain Science Co., LTD. (02172.HK) - (a spin-off subsidiary of Microport Medical)
Listing date: July 15, 2022
Offering price: HK $24.64
Performance: It fell below the issue price on its first trading day. It closed just above the issue price on the day, but then quickly continued to decline.
Business: Focused on interventional devices for cerebrovascular diseases, it is a leading company in the field of neurointervention.
4. Beijing MegaRobo Technologies Corp. - has postponed its listing
Note: Although the company eventually postponed its IPO plan, the difficult initial public offering process and the lackluster market subscription perfectly reflected the attitude of the capital market towards the segment at that time.
Business: Providing automation and intelligence solutions in the life sciences sector.
In-depth analysis of the reasons for the breakdown
The widespread price drops of biopharmaceutical stocks are a concentrated manifestation of the loss of "favorable timing, geographical advantages and human resources".
1. Macro and Market Environment (Unfavorable timing)
1. Global liquidity crunch: The Fed embarks on an aggressive rate-hiking cycle to combat inflation. This leads to:
Valuation model shock: Biopharmaceutical firms, particularly unprofitable 18A companies, whose value is highly dependent on discounted cash flows in the distant future. A sharp increase in interest rates has led to a surge in the Discount Rate, a significant reduction in the present value of future cash flows, and a complete disruption of valuation logic.
Capital withdrawal from high-risk assets: Global funds are flowing out of emerging markets and high-risk growth stocks such as Biotech and back to risk-free assets in the United States. The Hong Kong stock market has dried up liquidity, and the biopharmaceutical sector has become a "hard-hit area".
2. Geopolitical and regulatory risks: The audit turmoil of Chinese concept stocks and the Holding Foreign Companies Accountable Act, though not directly targeting Biotech, have caused panic among Chinese concept stocks as a whole, affecting all Chinese companies listed in Hong Kong and causing a sharp decline in market risk appetite.
2. Industry and Policy Factors (Industry Winter)
1. Global biotech investment ebb: After 2021, the global biotech sector has slumped sharply from its investment peak. The NASDAQ Biotech Index (XBI) continues to fall sharply, and Hong Kong-listed 18A companies, as part of the global biotech sector, cannot remain unscathed and are under significant downward pressure on valuations.
2. China's health insurance cost control policy continues to deepen:
Regularized and expanded centralized procurement: The scope of centralized volume-based procurement of drugs and high-value medical consumables has been expanding, and prices have dropped sharply. Even for innovative drugs, there is a trend of "soul-cutting" in medical insurance negotiations. Investors are worried that even if companies succeed in developing new drugs, future commercial returns may be greatly discounted due to Medicare cost control, and the profit outlook becomes blurred.
"Me-too" competition is intense: Previously, capital markets found that a large number of domestic pharmaceutical companies are flocking to popular targets such as PD-1 and EGFR, and research and development homogeneity (" competition ") is extremely severe. This means that even if a product is successfully launched, it will face a fierce price war, with market space and profit margins severely squeezed and investment value greatly reduced.
3. Secondary market performance spreads to the primary market: The continuous decline in secondary market share prices makes private equity financing in the primary market extremely difficult, and Pre-IPO round investors see no exit returns, and the entire industry's financing chain is trapped in a vicious circle.
3. Company and Transaction Specific Factors (insufficiency of itself)
1. Valuation pricing out of touch with reality: This is one of the core reasons. Many companies' offering prices are still based on valuation levels at the peak of the 2020-2021 industry bubble, failing to reflect in time the already rapidly changing macro and industry environment. The huge "expectation gap" between overvaluation expectations from investment banks, companies and existing shareholders and extreme pessimism from secondary market investors directly led to the breakdowns.
2. Unprofitable business model: The vast majority of 18A companies are still in the stage of huge loss-making R&D investment and have no self-sustaining ability. Investors are willing to pay for the "story" when market risk appetite is high; But when the market is cautious, the lack of revenue and profits becomes a hard spot, and investors pay more attention to the cash Burn Rate and how far they are from making a profit.
3. Lack of competitiveness and differentiation in product pipelines: Some companies' core product pipelines are not First-in-class or Best-in-class, the clinical data is not impressive, or they lack a clear competitive advantage in a highly competitive race. This may be overlooked during market booms, but all the flaws are magnified and examined during market downturns.
4. Lack of liquidity: The overall liquidity of the Hong Kong stock market is insufficient, and the market capitalization of 18A companies is relatively small, with light trading volume. A small amount of selling can lead to a significant drop in share prices, creating a "liquidity discount".
In summary, the widespread share price drops of Hong Kong-listed biopharmaceutical and medical device companies since 2022 are an inevitable result of the double pressure of "the ebb of the global macro interest rate tide" and "structural adjustment in China's pharmaceutical industry".
It marks a fundamental shift in the capital market's investment logic in the sector: from paying for the "Narrative of innovation" in the past to paying more pragmatically and rigor for the "Certainty of commercial returns". Only those companies that truly have global innovation capabilities, differentiated pipelines, strong commercialization capabilities and fine cost control capabilities will survive this cold winter and win over investors when the market recovers.
The overall performance of the Hong Kong stock market from 2025 to date and the performance of the biotechnology and medical device sectors
Since 2025, the Hong Kong stock market has been active as a whole, and the biotechnology and medical devices sectors have also shown their own highlights and development trends. I'll use a table to help you get a quick look at the core data before delving into the details:
The overall situation of the Hong Kong stock market
in 2025 The Hong Kong stock market, especially IPO activities, will be very active. In the first eight months, the total amount of funds raised through ipos in Hong Kong reached 134.5 billion yuan, an increase of nearly six times compared with the same period last year. Behind this is a series of listing system reforms by the Hong Kong Stock Exchange, such as providing a more convenient listing channel for special purpose technology companies, which has attracted the participation of many international long-term funds and sovereign funds from Singapore, the Middle East, etc. At the same time, mainland funds' investment in Hong Kong stocks through the stock Connect has continued to increase, with annual net purchases exceeding a record high of HK $1 trillion, which has strengthened mainland funds' say in pricing Hong Kong stocks.
Biotech sector: Driven by both performance and innovation
The biotech sector of Hong Kong stocks (especially innovative drugs) will perform particularly well in 2025.
· Strong performance: Among approximately 110 Hong Kong-listed biopharmaceutical companies, nearly 70% achieved year-on-year revenue growth, and over 80% showed positive net profit attributable to shareholders. The core drivers are the increased sales of innovative products by leading companies (such as Junshi Biopharmaceuticals' toripalimab, which saw a 42% increase in domestic sales), external licensing cooperation (such as the licensing agreement between Novogene and Prolium), and AI-enabled R&D (such as Xtalpi Holdings, which saw a surge in revenue).
· Active ipos and refinancing: Nearly 10 biopharmaceutical companies have listed on the Hong Kong Stock Exchange this year, and there has been a strong increase in refinancing activities after listing.
Medical devices: Opportunities amid differentiation
The medical devices sector faced challenges as a whole in the first half of 2025, but with significant differentiation within its sub-sectors and expectations of improvement in the future.
· High-value consumables lead the recovery: The high-value consumables sub-segment performed relatively steadily, with revenue increasing by 3.99% in the first half of 2025 and 7.61% in the second quarter of 2025. This is mainly due to the gradual implementation of centralized procurement for many high-value consumables categories, clearing the negative impact, and enterprises finding new growth points through innovation iteration and accelerated overseas expansion (such as the rapid growth of overseas business of Nanwei Medical and Chunli Medical).
· Medical devices expect a turning point: The revenue of the medical devices sub-segment declined in the first half of the year, but the market generally expects a turning point in performance in the third quarter of 2025. This is due to the recovery of domestic bidding demand and the implementation of equipment renewal policies.
· Short-term pressure on in vitro diagnostics: The in vitro diagnostics (IVD) sub-segment has been significantly affected by policies such as DRGs/DIP payment reform, mutual recognition of test results, and centralized procurement, resulting in a simultaneous decline in both volume and price. The market expects its negative impact to bottom out and clear by the end of 2025. In the medium to long term, innovation and going global will remain the direction of development in this field.
Most institutions are optimistic about the future
performance of the Hong Kong stock market. Zhang Yidong of Industrial Securities expects the Hang Seng Index to rise to 28,000 around November. Innovative drugs, the Internet and new consumption sectors are favored.
For biotech and medical devices:
· Biotechnology: The long-term growth logic of the sector remains clear as China's innovative drugs enter the "realization stage" and the Hong Kong Stock Exchange continues to optimize its listing mechanism.
· Medical devices: In the short term, the medical devices sector is expected to reach a turning point in the third quarter of 2025. In the medium to long term, attention should be paid to valuation restoration under policy optimization, deepening of "innovation + going global" capabilities, and investment opportunities in themes such as AI healthcare and brain-computer interfaces.
But we also need to be aware of some potential risks, mainly including:
· Uncertainties in industry policies (such as more than expected reductions in centralized procurement and the intensity of medical insurance pressure control).
· The risk of underperformance or failure in research and development.
· The risk of intensified industry competition.
· International geopolitical risks and trade frictions.