The IPO frenzy is back, how can you seize the opportunity?
Since 2025, the Hong Kong IPO market has been continuously thriving. As of June 30, the IPO fundraising amount has reached HKD 104 billion, leading globally.
The recent performance of newly listed stocks has also been impressive, with the highest returns coming from $DUALITYBIO-B(09606.HK)$ , which saw a 116.7% increase on its first day of trading, earning HKD 11,039.91 per board lot!
Has the new stock market already entered a bull phase? How can we seize the opportunities? In this episode, Futubull's teacher and Futu Securities' Chief Analyst Arnold Tan discuss these questions.
Is the new stock market returning to its peak?
On the surface, it indeed seems so, but in reality, there are significant differences from the past. The rules for subscribing to new shares still have room for improvement, and the Hong Kong market is now welcoming high-valuation, high-profile companies such as $NONGFU SPRING(09633.HK)$ 、 $KUAISHOU-W(01024.HK)$ 、 $JD HEALTH(06618.HK)$ , and the well-known $POP MART(09992.HK)$ , these popular IPOs have even attracted more than one million subscribers.
It is indeed difficult to win a lottery in a hot IPO, but the main difference now lies in the financing costs. In the past, although the amount of capital required for a single lot was higher, for example, $ANGELALIGN(06699.HK)$ a single lot's profit exceeded 40,000 Hong Kong dollars, a figure that no new listing has surpassed to date.
However, in the past, the lock-up period for IPO subscriptions was longer, leading to relatively higher interest expenses. The most significant change now is the introduction of the IPO settlement platform FINI system by the Hong Kong Stock Exchange, which has significantly reduced both financing costs and time.
In addition, the entry threshold per lot for current IPOs is relatively lower.
The relationship between the Hang Seng Index level and IPO returns
Speaking of differences, another clear point is that in 2021, the Hang Seng Index was around 30,000 points, while the current hot IPO market is at an index level of about 18,000 points. The overall level of the Hong Kong stock market has a certain impact on IPO returns, which is also one of the reasons why individual lots were more profitable in the past.
However, in the current new stock market, apart from the gains on the first day of listing, some leading stocks with strong fundamentals can see very significant cumulative gains. For example, $LAOPU GOLD(06181.HK)$ Contemporary Amperex Technology (CATL) rose from an IPO price of HKD 40.5 to a high of HKD 1,015, a gain of up to 24 times, which is a remarkable record.
Looking back, when Gold Shop listed, its valuation was only around 15 times PE. The undervaluation was the core reason for the sharp rise in share price, which was also related to the then depressed market conditions.
In short, although the first-day gains of the current new stock listings may not be as dramatic, it is undoubtedly a more friendly and fair market environment for beginners.
AH Stocks become a new focus, with policy support for the new stock market
Additionally, another highlight of the current new stock market is the increased presence of AH Stocks, especially leading companies listed on the A-share market, such as $CATL(03750.HK)$ 、 $HENGRUI PHARMA(01276.HK)$ Contemporary Amperex Technology (CATL), which have shown good first-day gains and returns.
This is supported by policy. In the past, H shares of AH Stocks often had a significant discount, which made many leading mainland companies less interested in listing in Hong Kong.
However, since last year, the mainland has introduced a series of policies to encourage leading companies in key industries to list in Hong Kong. The Hong Kong Stock Exchange (HKEX) has also implemented relevant policies to lower the threshold for H share issuance and to create a fast-track process for high-quality technology companies or those with large market caps, thereby improving the approval efficiency.
Moreover, many leading companies, such as Contemporary Amperex Technology, derive much of their growth from overseas business. Listing in Hong Kong can enhance their international visibility and access to financing channels, which is another important reason for them to come to Hong Kong.
With all these bullish factors, a new bull market for IPOs may not be far off.
How can beginners participate in IPOs? An introduction to the IPO subscription process
However, many people may not have participated in an IPO before. Let me briefly explain how to subscribe to an IPO.
For example, using the Futubull App:
On the "Market > HK Stocks" page, you can find the "IPO Center." Here, you can see which IPOs are currently open for subscription and which ones are likely to open soon.
In the 'Available for Subscription' column, you can see the companies that are currently in the IPO process.
Before a company goes public, it must first pass the hearing. You can click on 'Application Submitted' and pay special attention to companies with the status 'Passed Hearing,' as these companies may soon start their IPOs.
Participating in an IPO is quite simple. If there are no public holidays in between, the entire process will not be very long, and the funds will not be tied up for too long.
We consider the pricing day as T-day. The subscription period is before T-day, usually lasting 3.5 trading days, and ends at 9:00 AM on the fourth trading day.
Based on experience, some brokers typically announce the allocation results around 4 or 5 PM on the pricing day. If you are allocated shares, the Futu App will notify you of the number of shares you have been allocated, and the remaining funds will be refunded to your account immediately. You can then proceed to subscribe to other new stocks. Of course, this is the most common scenario, but there can also be delays in the announcement.
The day after the pricing is the grey market trading, followed by the official listing of the new stock.
What is the grey market?
The grey market for new stocks refers to over-the-counter trading before the official listing, usually conducted after the market close on the trading day before the listing. Since it is not matched through the HKEX system but rather through the internal systems provided by brokers, the quotes and liquidity can vary among different brokers. Futu also has its own grey market, and if you subscribe to new stocks through Futu, you can sell them in the grey market after being allocated. Even if you are not allocated any shares, you can still buy stocks in the grey market.
There are several important dates to remember when subscribing to new stock offerings, including: the subscription deadline, the announcement or grey market trading time, and the listing date. You can forget all other dates, but these must be remembered!
How can you increase the returns from subscribing to new stock offerings?
To increase the returns from subscribing to new stock offerings, there are three key points to focus on.
1. Choose high-quality companies for subscription
After all, subscribing to new stock offerings is also an investment, not a guaranteed profit. Approximately 30% of new stocks will break below their issue price on the first day of trading.
To avoid this situation, it is best to understand the quality of the new stock during the offering period, including the company's financial condition, business stability, future plans, and industry competitiveness. Typically, industry leaders or companies with high market scarcity are more popular.
To get a comprehensive understanding of a new stock, you can read the prospectus. If you find the hundreds of pages too long, you can also follow the summaries and related discussions published by Futubull New Stock Guru in the Futubull community.
2. Appropriately use leverage
After filtering the new stocks, the next step is to subscribe. How can one increase their chances of allocation? The answer is to leverage your capital.
There is a rumor that the allocation rate for one lot is the highest. Does this mean it is best to only apply for one lot?
In fact, the allocation rate for one lot is indeed the highest, but this does not guarantee that you will be allocated if you only apply for one lot. For many popular new stocks, you may need to apply for several dozen lots to secure even one lot. The more you apply for, the higher your probability of being allocated.
If your funds are limited and you can only afford one lot, then applying for just one lot is the safest approach. At Futu, subscribing with pure cash incurs no fees, making it the most cost-effective option.
However, if you want to ensure a higher chance of allocation or to get more shares, you should use margin financing (financed subscription).
When subscribing, Futu offers two types of financing: bank financing and Futu financing.
Using bank financing, you can obtain up to 10 times leverage and be exempt from margin interest, but there is a 100 yuan fee. If you only use Futu financing, there is no fee, and the leverage ratio depends on your purchasing power. Both financing methods can be used in combination to further amplify your subscription funds.
If you only use Futu financing, there is no fee, and the leverage ratio depends on your purchasing power. Both financing methods can be used in combination to further amplify your subscription funds.
Of course, using margin also carries risks. If the value of the newly listed stocks exceeds your purchasing power, Futu may require you to add more funds or liquidate part of the new shares. Therefore, before using margin, you should assess your risk tolerance and account situation.
Regarding margin, many clients are unclear about when the interest starts and how many days of interest they will be charged.
Margin interest is calculated from the deduction date, which is the subscription deadline—regardless of when you subscribe, interest begins on the subscription deadline.
Margin interest is calculated on a daily basis, including weekends and public holidays.
The number of interest days depends on the amount of margin borrowed and your account's funding situation. If there is still an outstanding balance after the allocation results are announced, interest will continue to accrue until the position is closed and the account has no outstanding balance.
What are some tips for selling new stocks?
There is a saying in the market: 'subscribe to new listings but don't hold them,' which is a trading strategy. It means that after subscribing to new stocks, you should sell them during the gray market or on the first trading day, rather than holding them long-term.
Historical data suggests that about 60 to 70 percent of new stocks rise on their first day of trading, but the likelihood of continued profitability decreases due to various factors.
Of course, there are exceptions, such as the company Lao Pu Gold, which continued to soar after its listing, but such stocks are relatively rare.
In summary, here are the three key points for subscribing to new stock offerings:
1. Choose high-quality, promising companies to subscribe to
2. Use margin financing to increase your subscription funds, thereby enhancing your chances of allocation
3. Based on historical data, selling most new stocks on the first day of trading has a higher probability of success
