At the recent Lujiazui Forum in Dalian, financial regulators from China signaled ongoing efforts to enhance cooperation between Shanghai and Hong Kong, two cities competing to cement their status as Asia’s premier financial hubs. Among the developments highlighted was Hong Kong’s approval to launch yuan-denominated Treasury bond futures this August, while Shanghai secured expanded privileges including offshore bond issuances and foreign-exchange trading within its pilot free-trade zone.
Despite these advances, global investors are advocating for deeper integration of the two markets, particularly through the establishment of an IPO connect scheme. Such a program would allow investors on both sides to directly participate in initial public offerings (IPOs), marking a significant extension of the existing Stock Connect framework instituted a decade ago. The Stock Connect currently enables cross-border trading in equities and has gradually widened to encompass bonds, exchange-traded funds, wealth management products, and interest-rate swaps.
Morgan Stanley Asia CEO and co-head of global equities, Gokul Laroia, described an IPO connect as a logical next step that could foster greater alignment between Hong Kong and Shanghai’s financial ecosystems. He emphasized investor enthusiasm for accessing the primary market amid a robust pipeline of prospective listings, particularly from innovative companies in sectors like artificial intelligence and semiconductors.
The idea is not new: Charles Li Xiaojia, former CEO of Hong Kong Exchanges and Clearing, first proposed an IPO connect in 2016, though regulatory approval did not materialize during his tenure. Calls for the scheme have intensified recently as Hong Kong seeks to reinforce its role as a global financial center amid geopolitical uncertainties.
Stephen Law Cheuk-kin, a member of the National Committee of the Chinese People’s Political Consultative Conference and adviser to the Ministry of Finance, reiterated the need for greater integration of primary markets. Current arrangements permit mainland investors to purchase Hong Kong-listed shares after their IPOs via secondary market trading but exclude them from IPO subscriptions, which often yield notable first-day gains. Law presented a proposal to Beijing in March 2025 outlining a phased approach beginning with qualified professional investors, such as mutual funds and pension funds, using existing Stock Connect infrastructure to subscribe to Hong Kong IPOs. Wider participation could follow subsequently.
Similarly, Peter Wong Tung-shun, chairman of HSBC Asia-Pacific, advocated in March for a mechanism enabling investors in Shenzhen and Hong Kong to engage in IPOs across both markets. He linked the proposal to broader goals of enhancing financial cooperation within the Greater Bay Area and advancing the international use of the yuan.
Historically, Beijing has tended to announce supportive policies for Hong Kong around the July 1 anniversary of the 1997 handover. Nonetheless, no definitive timeline has been disclosed for the introduction of an IPO connect, leaving the scheme’s future development uncertain as stakeholders await further guidance.