The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Hudson Lockett

HONG KONG, March 19 (Reuters Breakingviews) - Hong Kong’s equity capital markets bankers have gone from famine to feast, and now the risk is indigestion. Last year saw business roar back to life after years of thin gruel, vaulting the city’s stock exchange to the top of global rankings as 116 market debuts brought in some $38 billion, per Dealogic. But the listing queue’s growing length has switched from positive indicator to blaring claxon as regulatory scrutiny mounts.

At February’s end, 460 firms had applications being processed to list shares on the stock market’s main board, according to figures from Hong Kong Exchanges and Clearing. Exchange officials point to this figure as boding well for deal flow, but it’s nearly four times the number of companies that listed during all of 2025 and more than double KPMG’s forecasted maximum of 200 debuts for 2026.

The influx of capital-hungry and largely Chinese firms reflects a dearth of funding options available on the mainland, where officials have limited fresh issuance in the so-called A-share market in a bid to engineer a slow bull market. That has helped drive a surge of issuance in Hong Kong by companies that already trade onshore, with such "A-H" deals accounting for over half of funds raised by new listings in 2025, according to KPMG.

But the hunger of both issuers and bankers to pump out listings at max speed after a protracted drought resulted in sloppy applications and overwork for IPO principals—some of whom were discovered to be running as many as 19 deals simultaneously, according to Hong Kong’s Securities and Futures Commission. Hence the SFC’s January order limiting the city's bankers to leading no more than five deals at once.

This cap makes life much harder for Chinese banks led by China International Capital Corp 601995.SS and CITIC Securities 600030.SS, many of which had begun deploying principals on every deal in sight to capture more business in the city. At the margin it’s good news for global lenders whose local teams were winnowed down during the slump.

But mainland lenders, facing a deal shortage onshore, are also competing fiercely in Hong Kong on cost. Combined with the ease of pricing A-H listings for companies with established valuations, this has pushed down fees on many offerings below 1% and prompted banks to prioritise high volumes.

The indigestion could worsen if Beijing pressures more mainland firms to reconsider plans for share sales in the city on concerns over longstanding bugbears like capital flight. The syndicate head at one Wall Street bulge-bracket lender says this has already begun, with Chinese officials more seriously scrutinising applicants’ need for hard currency funding.

This may not pose as much of a threat to the handful of banks which have come to dominate Hong Kong’s post-slump market in proper big-ticket IPOs, namely Goldman Sachs GS.N, Morgan Stanley MS.N and UBS UBSG.S. Others could face a more serious squeeze. As one Western equity capital market banker puts it: “We’re very much a commodity now.”

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CONTEXT NEWS

As of the end of February, 460 firms had applications under processing to list shares on the main board of Hong Kong’s stock market, according to figures from Hong Kong Exchanges and Clearing. That is almost four times the number of companies which listed in the city during all of 2025 and more than double KPMG’s forecasted maximum of 200 market debuts in 2026.

(Editing by Una Galani; Production by Ujjaini Dutta)

((For previous columns by the author, Reuters customers can click on LOCKETT/ hudson.lockett@thomsonreuters.com))