Privatization Wave in Hong Kong Stocks: Exiting Liquidity Traps to Enable Strategic Transformation

The Hong Kong equity market has experienced an unprecedented surge in privatization activity year to date. Wind data show that by November 6 more than 20 listed companies had been taken private and delisted due to privatization, exceeding the 15 privatizations recorded for the whole of 2024 and spanning sectors including finance, real estate, consumer, and technology. Several prominent issuers have also disclosed privatization proposals, among them HSBC Holdings, Dongfeng Motor Group, and Geely Automobile.

Liquidity pressures have been a primary catalyst for this trend. According to Wind, 52 companies have exited the Hong Kong market so far this year, of which 28 had their listings cancelled and 22 underwent privatization, while two voluntarily withdrew their listings. Privatization now accounts for 42.31% of delistings this year, up from 30.61% in 2024. The scope of privatizations includes names from real estate such as Beijing Construction, Jin’an Industrial, and Ronshine Service; consumer companies including Bao Fa Group, Lippo, and Fosun Tourism & Culture; financial firms such as Get Nice Financial; semiconductor-related Beken Corporation; and pharmaceutical firm Dongyangguang Changjiang Pharmaceutical.

Although drivers vary by company, most privatizations reflect two recurring conditions: prolonged undervaluation that fails to reflect intrinsic value and impairs fundraising prospects, and persistently low turnover that renders public trading ineffective. While liquidity in Hong Kong improved in part due to strong performance among technology stocks, capital has concentrated in a narrow set of popular names, leaving many small- and mid-cap issues with limited secondary-market activity. Sui Dong, a researcher at PaiPaiNet Wealth, noted to Securities Times that privatization can help companies escape public-market valuation constraints and achieve fairer asset pricing, while also reducing the recurring costs associated with maintaining a public listing when refinancing channels are effectively closed.

Strategic repositioning provides a deeper rationale for delisting activity. Dongfeng Motor Group’s August announcement drew market attention by outlining a plan to spin off its new-energy vehicle unit Voyah Auto and distribute shares to existing investors ahead of an introduction listing, coupled with a privatization of Dongfeng Motor Group through a merger involving Dongfeng Motor Investment. Management stated that the transaction aims to concentrate high-quality resources in emerging segments, support valuation reconstruction, and accelerate the transition from internal combustion to new-energy vehicles; the distribution and introduction listing of Voyah Auto are positioned to broaden financing avenues, strengthen brand presence, expand overseas operations, and enhance governance.

Fosun Tourism & Culture, which completed privatization and delisting in March, cited prolonged stock-price weakness and thin liquidity as primary motivations and signalled plans to pursue a leaner asset model post‑privatization to boost operating efficiency and competitiveness. Pan Jun, an investment manager at Cheese Fund, observed that privatization enables issuers to avoid short-term market volatility, reduce listing-related expenditures, and focus capital and management attention on long-term strategic transformation and merger integration. From a market-structure perspective, privatization can accelerate capital reallocation and allow higher-quality assets to attract investor attention, thereby supporting overall market improvement.

Privatized issuers to date have concentrated in traditional industries and predominantly among small- and mid-cap companies, a pattern that may weigh on short-term market activity but could ultimately facilitate capital migration toward emerging sectors. Dai Lu, Market Director at Tongwei Investment, suggested that while privatizations might temporarily suppress turnover, they are conducive to structural optimisation and can attract capital to high-growth areas over time. The ongoing privatization wave thus reflects market clearing and resource reallocation, with delisting by privatization emerging as a strategic response to low valuations and constrained financing.

Beyond addressing valuation and liquidity issues, privatization can generate synergies through more concentrated resource allocation and streamlined decision‑making. A recent example is HSBC Holdings’ October proposal to take Hang Seng Bank private through a scheme of arrangement implemented by its wholly owned HSBC Asia Pacific subsidiary, a transaction that HSBC said would preserve day‑to‑day customer relationships while providing Hang Seng clients access to HSBC’s global network and product offerings. Pan Jun noted that removing public‑shareholder constraints via privatization can reduce operating costs, improve management efficiency, optimise asset allocation, strengthen strategic execution, and enhance corporate resilience in the face of industry disruptions.