On Friday, the China Securities Regulatory Commission, the country’s top market regulator, announced several measures that would deepen links among stock markets in Hong Kong, Shenzhen, and Shanghai.

The measures include relaxing eligibility criteria for exchange-traded funds in the Shanghai–Shenzhen–Hong Kong Stock Connect program, which connects HK-based investors to mainland Chinese stock markets and vice versa. Real estate investment trusts will also be eligible for Stock Connect. The CSRC noted as well that it would support letting mainland Chinese investors trade yuan-denominated shares in Hong Kong.

The package “fully demonstrates the central government’s support for Hong Kong,” Paul Chan, the city’s financial secretary, wrote in a blog post on Sunday. 

Slow IPOs

Also on Friday, the CSRC said it would encourage Chinese companies to list in Hong Kong. The Chinese city previously attracted multibillion-dollar listings from mainland Chinese firms trying to tap into international capital, like livestreaming platform Kuaishou’s IPO, which raised $5.3 billion in 2021.

Yet Hong Kong listings have since dried up. Hoped for debuts, like a possible listing from Cainiao, Alibaba’s logistics division, have evaporated. The most lucrative deals are instead take-private deals, with cosmetics company L’Occitane and luggage maker Samsonite reportedly considering buyouts.

Even as the global IPO market recovers, companies are still wary of listing in Hong Kong, in part because of worsening U.S.-China tensions.

In addition, Beijing has recently demanded more scrutiny of Chinese companies seeking to list in offshore markets, including Hong Kong, following the fiasco around ride-hailing firm Didi Chuxing’s 2021 listing on the New York Stock Exchange. Last year, the CSRC said that it would require companies to comply with China’s national security and personal data protection legislation before it granted permission to go public overseas. 

Hong Kong’s IPO market had the slowest start to the year since 2009, with just 12 companies raising $604 million in the first quarter, according to the South China Morning Post citing data from the London Stock Exchange Group. It’s a worse performance than the other two major Chinese equity markets: Shanghai and Shenzhen, where new listings raised $986 million and $708 million, respectively. The New York Stock Exchange is in first place, with IPOs there raising $4.5 billion.

Ending the losing streak?

Hong Kong’s stock market is on a four-year losing streak, and was one of the worst-performing Asian equity markets of 2023. In late January, India’s exchanges overtook Hong Kong as the world’s fourth largest equity market by combined value of shares, according to Bloomberg calculations. 

The Hang Seng Index, which tracks the largest companies listed in Hong Kong, is down 17.3% over the past year, and has lost about 50% of its value since its record high in mid-2018. 

Executives at Hong Kong Exchanges and Clearing (HKEX), which manages the city’s stock exchange, are hopeful that the city’s slump will soon come to an end.

At the Fortune Innovation Forum in Hong Kong in late March, HKEX CEO Bonnie Chan said she expected IPOs, including from companies based outside China, to pick up as the market improves.

“There are just so many exciting companies trying to figure out new products, come up with new inventions, and this will be a very strong supply of issuers down the road,” Chan said at the time.

The Hang Seng rose 1.8% on Monday, the first day of trading since the CSRC announced its new initiatives.