Hong Kong’s IPO Revival Gives China-Focused Private Equity a Critical Exit Path

The revival of Hong Kong’s IPO market is reshaping the outlook for private equity funds that have long struggled to exit China-based investments. After two years marked by frozen deal flows and muted valuations, the ability to list companies in Hong Kong at attractive multiples has rapidly lifted sentiment. Firms have raised $18.2 billion through IPOs in the city this year as of October, positioning Hong Kong to become the world’s top listing destination in 2024.

This momentum has been reinforced by a striking rebound in local equities. The Hang Seng Index has climbed more than 28% year-to-date, far outpacing the S&P 500’s gain of less than 13%. The stronger market backdrop is renewing optimism that China-focused deals can once again deliver meaningful liquidity.

Investment leaders say China is re-emerging as a compelling opportunity after several years of caution. L Catterton managing partner Scott Chen notes that domestic brands are strengthening and household savings remain large, creating a chance to “buy growth at a discount.” He believes the worst is over and that consumer confidence is gradually improving, especially in favor of homegrown brands.

Other global managers share this view. PAG’s Nikhil Srivastava points out that China assets now offer appealing valuations partly because foreign investors retreated, reducing competition for high-quality consumption-driven companies. Lexington Partners’ Tim Huang adds that sentiment had swung to “anything but China,” but now appears to be returning to a more balanced middle ground. Investors with discipline and a long-term approach, he argues, can still find compelling returns.

Even without exits, many portfolio companies have continued generating steady distributions, helping mitigate investor concerns. Srivastava highlights that 15–20% cash-on-cash returns—excluding any growth—effectively allow investors to “get paid to wait.”

Still, the IPO channel matters immensely for China-focused private equity managers who have struggled since 2021 to offload assets amid sluggish M&A activity and tight regulation around domestic Chinese listings. Hong Kong has become the primary outlet, but the surge in interest has created bottlenecks. More than 300 IPO applications were pending as of end-October, compared with fewer than 70 a year earlier, underscoring the risk that delays could hinder firms hoping to capitalize on strong valuations.

Regulators are signaling support. China Securities Regulatory Commission chief Wu Qing recently reaffirmed commitments to streamline overseas listing processes and deepen financial integration between mainland markets and Hong Kong.

With markets improving and listing channels gradually reopening, private equity managers expect exit opportunities to accelerate. As Srivastava notes, the recovery in Hong Kong could ultimately translate into stronger returns—if firms can navigate the increasingly crowded queue to go public.