China AI Wave Fuels Hong Kong Market Rally

Key Takeaways

• AI innovation from mainland China, particularly the launch of DeepSeek, has revitalized investor interest in Hong Kong’s IPO market.
• 15 IPOs launched in Q1 2025, six of which raised over HK$1 billion each.
• DeepSeek’s efficient architecture approach is reshaping how investors view AI capabilities in China.
• HKEX reforms and dual listings have significantly contributed to record IPO proceeds.
• Despite geopolitical risks, market sentiment remains optimistic for the long term.

Mainland China AI Ignites Global Interest

The renewed vigor in the digital market can be traced back to a landmark moment in January: the launch of DeepSeek, a Shenzhen-based large language model (LLM) that has significantly reshaped perceptions of China’s AI development capabilities.

According to data from KPMG, the first quarter of 2025 saw 15 IPOs launched in Hong Kong, six of which raised over HK$1 billion (US$127 million) each. A majority of these offerings were concentrated in the technology sector, underlining a sharp pivot toward innovation-led listings.

DeepSeek Redefines The AI Narrative

Louis Lau, Head of the Hong Kong Capital Markets Group at KPMG China, said:

“DeepSeek’s innovative approach to AI development marks a significant shift in the industry. It challenges the conventional belief that bigger models equate to better performance.”

Louis Lau, Head Of Hong Kong Capital Markets Group, KPMG China

Source: Handout

Unlike traditional models that depend heavily on computational power and size, DeepSeek emphasizes architectural efficiency, designing smarter, leaner models that deliver high performance with fewer resources.

Cost-Efficiency Opens The Door To New Market Players

This efficient design model has captured the attention of global investors, especially in light of increasing hardware restrictions. The ability to maintain strong AI performance without access to the most advanced US-made chips has become a strategic advantage.

Lau explained:

“By delivering high performance at a lower cost, DeepSeek’s models significantly lower the barriers to entry for smaller companies. This opens the door for broader market adoption and presents a lucrative investment opportunity.”

 

Hong Kong’s Best Quarter Since 2021

The impact of AI-driven confidence has been clearly reflected in the IPO figures. The first quarter of 2025 has been Hong Kong’s best performing quarter for IPO proceeds since 2021.

A Robust Chinese Tech Ecosystem

Ross O’Brien, Analyst-in-Chief at Delta Analysis, echoed the growing confidence in China’s AI sector:

“China has a robust ecosystem of digital technology firms. The market is clearly signaling that machine learning is being rapidly developed at scale. That gives investors the confidence to place strategic bets on Chinese AI firms”.

Source: Ross O’Brien

HKEX Structural Reforms Drive Growth

Lau credited part of this resurgence to the Hong Kong Exchanges and Clearing (HKEX) and its ongoing structural reforms.

The listing regime, initially launched in April 2018, allowed for pre-revenue biotech companies under Chapter 18A and companies with weighted voting rights under Chapter 8A to go public.

Surge In A+H Dual Listings

Another key driver has been the rise in dual listings by A-share companies—mainland Chinese firms already listed in Shanghai or Shenzhen seeking a secondary listing in Hong Kong.

Hong Kong’s fast-track process for eligible dual listings, coupled with policy support from Beijing, has accelerated the listing pipeline for technology-driven firms.

FAQ

What is DeepSeek and why is it important?

DeepSeek is a Shenzhen-developed large language model (LLM) that emphasizes architectural efficiency over scale. Its performance has challenged existing paradigms in AI development.

What are A+H listings?

These are dual listings where a Chinese company listed on a mainland stock exchange (A-share) also lists in Hong Kong (H-share), expanding their investor base and capital access.

How has HKEX helped improve Hong Kong’s landscape?

HKEX’s reforms, including the acceptance of pre-revenue biotech firms and companies with weighted voting rights, have made it easier for high-growth companies to list.