Major Restructuring of the Hong Kong Stock IPO Ecosystem

Why do AI + H companies prefer to skip the Green Shoe Mechanism for quick inclusion?

By reporters Zeng Zijian and Yuan Dong

After a new stock is listed in Hong Kong, if it cannot achieve quick inclusion (meaning being included in the Hong Kong Stock Connect), mainland investors may have to wait a longer time and pay higher costs to invest in their preferred companies. However, as more A+H companies achieve first-day inclusion, the investment ecosystem for mainland investors is changing.

Daily Economic News

As of March 19, 2026, the Hong Kong stock market has welcomed 28 new listings this year, raising a total of HKD 97.166 billion. Among them, 13 companies listed as A+H shares, raising HKD 62.577 billion.

A significant market change is underway: an increasing number of dual-listed new stocks are abandoning the “Green Shoe” mechanism (over-allotment option) and choosing to be included in the Hong Kong Stock Connect on their first day of listing. This trend not only reshapes the IPO ecosystem in Hong Kong but also offers new opportunities for mainland investors to invest in Hong Kong stocks.

4 New Stocks Choose First-Day Inclusion

Since 2026, the enthusiasm for A+H share listings in Hong Kong has continued to grow. By March 19, 13 A-share companies had completed Hong Kong listings, raising HKD 62.577 billion, accounting for 64.40% of the total IPO funds raised in Hong Kong this year. This makes them the main contributors to Hong Kong’s fundraising. In comparison, in the same period in 2025, only 3 A+H stocks listed in Hong Kong, with a total of 19 A+H listings for the entire year.

Notably, four stocks have opted for first-day inclusion this year: Zhaowei Mechanical and Electrical, Megalithic Smart, Guanghe Technology, and National Technology, accounting for 14.29% of the total new listings during this period. In the same period in 2025, only one stock achieved first-day inclusion, with a total of three throughout the year. First-day inclusion has gradually shifted from an exception to an important option for A+H listings.

Market performance shows that stocks with first-day inclusion tend to exhibit “steady differentiation.”

Zhaowei Mechanical and Electrical, listed on March 9, rose 2.41% on its first day, with a profit of HKD 172 per board lot.

Megalithic Smart, listed on March 10, increased by 1.52%, with HKD 44 profit per lot.

The other two stocks, Guanghe Technology and National Technology, are scheduled to list on March 20 and March 23, respectively.

Liquidity Becomes a Core Priority

Achieving first-day inclusion in Hong Kong is not without thresholds. The key conditions mainly relate to listing type and mechanism design. According to listing rules, A+H share companies are the primary group eligible for first-day inclusion. These companies do not need to meet traditional metrics such as market cap or turnover rate, as long as they do not set the “Green Shoe” mechanism, they can be included in the Stock Connect on the listing day. If a “Green Shoe” is set, they must wait until the stabilization period (usually 30 days) ends before being included.

Analysts point out that for companies, abandoning the “Green Shoe” mechanism in exchange for first-day inclusion is a strategic choice regarding liquidity. While the “Green Shoe” can stabilize stock prices through underwriters, it causes trading data within the first 30 days to be influenced by stabilization efforts, which regulators believe do not reflect true market supply and demand. Therefore, they require waiting until the stabilization period ends before reviewing inclusion eligibility. Without the “Green Shoe,” the stock price from day one is fully market-driven, and trading data is more authentic, meeting the criteria for Hong Kong Stock Connect review and attracting mainland funds quickly. This choice reflects issuers’ emphasis on liquidity, especially amid high P/E ratios in the Hong Kong IPO market, where mainland participation can significantly boost trading activity.

Additionally, A+H companies have inherent advantages that lower the barriers to inclusion. Having passed regulatory review in the A-share market, these companies generally have high transparency and compliance standards, and do not need to meet additional Hong Kong Stock Connect thresholds such as market cap or turnover rate, further shortening the inclusion cycle.

Mixed Investor Sentiment

First-day inclusion benefits mainland investors in several ways.

First, it expands investment options. Mainland investors, who typically cannot open Hong Kong accounts, can participate in the IPOs’ first-day trading through the Stock Connect, sharing early growth benefits. Second, valuation advantages are significant; currently, the premium between A and H shares is generally high, offering a “low-cost” entry point. Third, risk is more controllable, as the business models and financial data of A+H companies are already disclosed in the A-share market, allowing investors to make decisions based on familiar information and reducing cross-border information asymmetry.

Market feedback shows a clear divide in mainland investors’ willingness to buy.

High-quality companies are highly sought after. For example, Guanghe Technology’s IPO was oversubscribed by 1,072 times, with 12 cornerstone investors subscribing for USD 190 million, demonstrating strong market confidence.

Similarly, Zhaowei Mechanical and Electrical received over 1,500 times oversubscription, with 21 cornerstone investors including top institutions like Hillhouse and GIC participating.

However, some companies without the “Green Shoe” mechanism have seen less enthusiasm. For instance, National Technology’s subscription was less than 6 times, mainly because cornerstone investors only subscribed for 13.6%. Megalithic Smart received 174 times oversubscription, with only 8 institutional cornerstone investors.

Industry Experts Recommend Three Types of Targets

For companies, first-day inclusion in A+H shares sacrifices some price protection but gains liquidity. For mainland investors, it provides a faster cross-border investment channel.

A Hong Kong-based broker told Daily Economic News that most mainland investors cannot participate in Hong Kong IPOs without opening accounts there, so they must wait until the stock is included in the Stock Connect to invest directly. If a stock cannot be quickly included, investors face longer waits and potentially higher costs.

“Yonghui Superstores’ H-share listing is a typical example,” the broker said. Yonghui H shares listed on February 6 at HKD 39, closing at HKD 40.52. However, it only achieved first-day inclusion on March 9. The day before (March 6), its price had already risen to HKD 44.72, a gain of over 10%, showing a clear “front-running” effect.

The broker also advised that mainland investors should establish more mature screening standards for first-day inclusion. He suggested focusing on three types of targets: first, industry leaders with high growth prospects (such as in technology or high-end manufacturing); second, stocks with reasonable A+H premium rates and strong cornerstone investor backing; third, stocks with moderate float and expected stable turnover. Investors should also monitor rule changes at the Hong Kong Stock Exchange and market sentiment shifts in both markets to hedge risks. With the ongoing development of the Guangdong-Hong Kong-Macao Greater Bay Area financial markets, more high-quality companies are expected to choose the first-day inclusion model, further broadening cross-border investment channels for mainland investors. To enjoy these policy benefits, investors should remain rational, select quality stocks, and aim for steady returns in the Hong Kong market.

Daily Economic News