CATL and Hengrui’s HK IPOs — Enter a “Hong Kong Revaluation 2.0” Era?

TradingKey - The strong market performance of two Chinese industry leaders — Contemporary Amperex Technology Co. Limited (CATL, 3750.HK) and Hengrui Pharmaceuticals (1276.HK) — following their Hong Kong IPOs has once again drawn global attention to the Hong Kong capital market.

After the surge in investor interest driven by the DeepSeek AI model and the earlier phase of "Hong Kong Revaluation 1.0", these new listings signal that high-quality Chinese companies may be fueling a new wave of valuation recovery — potentially marking the beginning of a "Hong Kong Revaluation 2.0".

In mid-May 2025, CATL, the world's largest EV battery manufacturer, went public in Hong Kong and saw its stock rise double digits for two consecutive days, raising $4.6 billion — making it the largest IPO globally in 2025.

On May 23, pharmaceutical giant Hengrui Pharmaceuticals surged more than 36% intraday on its first trading day, closing up 30% at the time of writing. This marks the largest IPO in the Hong Kong healthcare sector in the past five years.

A-H Share Valuation Gap Narrows

Among the approximately 150 companies listed in both mainland China (A-shares) and Hong Kong (H-shares), there has long been a phenomenon known as the “A-share premium and H-share discount” — where shares trade at a higher valuation onshore than offshore.

So far, only CATL, BYD, and China Merchants Bank have seen H-shares trade at a premium over their A-shares.

Analysts suggest that the historical discount in Hong Kong-listed stocks stemmed from lower liquidity and growth expectations, which were rooted in structural and institutional differences in the Hong Kong market.

According to Huatai Securities, several factors contributed to Hong Kong's reputation as a "value trap": divergence between earnings sources and liquidity supply; high concentration of foreign institutional investors, who tend to favor short-term risk control; and overweight in value-style sectors.

However, this is now changing. With the easing of U.S.-China trade tensions and a series of macroeconomic stimulus measures rolled out by the Chinese government, Hong Kong valuations are gradually recovering.

Earlier this year, the release of the DeepSeek AI model ignited a re-rating of Chinese assets, led by tech giants like Alibaba.

With CATL and Hengrui Medicine set to be included in the Hang Seng Index and MSCI indices, analysts believe these top-tier Chinese firms will attract significant inflows from international investors.

Their strong post-IPO performance could also encourage more high-quality Chinese companies to list in Hong Kong, further revitalizing the city’s capital markets.