Illustration: Xia Qing/GT

Many Chinese firms are setting their sights on launching IPOs in the Hong Kong Special Administrative Region,MKsport "riding on the stock market impetus provided by artificial intelligence (AI) start-up DeepSeek," the South China Morning Post reported on Tuesday. This trend underscores a broader narrative: the current surge in technological innovation within the Chinese mainland could inject new vitality into Hong Kong's stock market. Moreover, it presents fresh opportunities for reinforcing Hong Kong's status as an international financial center.

Hong Kong clinched the third spot in the 36th edition of the Global Financial Centres Index Report released in September 2024. This ranking underscores the economic vitality of Hong Kong under the One Country, Two Systems principle, effectively countering the pessimism of some Western critics about the city's economic prospects. With the backing of China's central government, Hong Kong has served as a crucial conduit for international investors aiming to tap into the burgeoning market opportunities on the mainland. This strategic role not only reinforces its status as a global financial hub but also highlights its important part in facilitating financial flows and investment activities.

The Chinese mainland is riding a new wave of innovation, fueled by progress in its industrial ecosystem, cutting-edge technologies, deep talent reserves and favorable market dynamics. This surge has seen a host of technology firms on a fast track to growth. If some of these companies choose to go public in Hong Kong, they stand to infuse Hong Kong's financial markets with a fresh influx of premium assets, capturing the attention of investors. Such a development would not only enhance the vibrancy of Hong Kong's financial market but also underscore its valuable role within the global financial landscape.

Now, some foreign financial institutions have demonstrated a strong interest in Chinese technological assets. Goldman Sachs, for instance, recently upgraded its target price for Chinese stocks, estimating that AI adoption could boost earnings growth and potentially bring in $200 billion of inflows, according to a report by Reuters on February 17. If Chinese tech companies intensify their interest in launching IPOs in Hong Kong, it would indicate a deeper integration of Hong Kong into the current wave of technological innovation sweeping across the Chinese mainland, along with the associated financial gains. This development would boost the vitality of Hong Kong's financial market, reinforcing its status as a dynamic hub within the global financial ecosystem.

In 2024, Hong Kong witnessed 71 IPOs, marking a slight decrease of 3 percent from 2023. Despite this, the funds raised surged by 89 percent to reach HK$87.5 billion ($11.3 billion), positioning the city fourth globally in terms of IPO fundraising. According to a report by the Securities Times on January 4, Invest Hong Kong anticipates that 2025 will continue to see large-scale companies listing in Hong Kong. 

This expectation is primarily due to the encouragement of the China Securities Regulatory Commission for leading mainland enterprises to list in Hong Kong and the expected continuation of a moderately relaxed monetary policy in the mainland, which is set to further drive the IPO trend, the report said.

In the context of the capital market's continued push for high-level opening to the outside world, listing in Hong Kong has become a step toward accelerating the internationalization process of some mainland enterprises, some of which are already listed on the A-share market. These companies are poised to tap into diversified funding sources, utilizing both the mainland and Hong Kong capital markets to bolster growth and expansion. 

Certainly, the path of tech start-ups to IPOs in Hong Kong comes with its own set of challenges. For instance, the inherent high volatility of start-up stocks could lead to more market fluctuations. 

Nevertheless, the potential support that the growth of mainland technology companies could offer to Hong Kong's financial market is immense. The Hong Kong capital market is becoming an important gateway for mainland tech firms to access international resources, as well as an important channel for overseas capital to invest in Chinese tech assets. Through this process, Hong Kong's status as an international financial center is set to be further solidified.

The author is a reporter with the Global Times. [email protected]