Hong Kong's IPO market has rebounded this year, raising a total of USD9 billion YTD, marking a YoY increase of 320%, though it was still below the 2020 peak, according to a report from UBS.

The average return on the Hong Kong IPOs this year has reached 18%, outpacing the HSI by 13%, compared to the average three-month post-IPO return of 4% in previous years. In UBS' opinion, this has reflected improved quality among listed companies, tighter IPO restrictions in mainland China, enhanced liquidity in Hong Kong stocks, and greater foreign interest in core Chinese assets.

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With some newly listed companies having further diversified and enriched the H-share sector mix, UBS upheld an optimistic outlook on H-shares given the temporary easing of tariffs, low foreign holdings, and valuations remaining lower than other markets.

The report also mentioned that the current A-H share premium of 33% is roughly in line with the 10-year average but below the nearly five-year average. Seeing that geopolitical tensions have eased following tariff relief, UBS believed there would be short-term room for the A-H share premium to narrow for possible factors including AI optimism that may be renewed by Deepseek's launch of updated models, increased valuation discounts for China's AI stocks compared to their US peers, better liquidity in Hong Kong stocks, and higher foreign capital inflows.