[NiuNiu Investment Tips] How to secure shares in highly sought-after IPOs? Two strategies to increase your chances of allocation!

Guest in this episode: Tang Niu, investment columnist.

"Surging over 300% on the first day of listing" and "earning over ten thousand Hong Kong dollars per lot" have become vivid depictions of the recent Hong Kong IPO market.

Many investors have expressed that securing shares in an IPO feels as thrilling as winning the jackpot. So, how can these lucky opportunities come your way? And how can you improve your chances of allocation? In this episode, we will share with you a comprehensive guide to participating in IPOs.

The data from Hong Kong's IPO market in October was impressive, with strong performance of new shares under the new mechanism.

Hong Kong's IPO market remained vibrant, as 12 companies were listed on the Hong Kong Stock Exchange last month (October), raising over HKD 2 trillion in total, marking a nearly 24% increase compared to September. In terms of subscription multiples, $GOLDEN LEAF INT (08549.HK)$ the public offering was oversubscribed by more than 11,464 times, making it the new 'oversubscription king' in Hong Kong's stock market since 2025.

Investors are undoubtedly most concerned about the returns from subscribing to new stocks. Three months after the implementation of the new allocation mechanism by the Hong Kong Stock Exchange, under Mechanism B, newly listed stocks no longer increase the shares allocated to retail investors due to oversubscription, indirectly reducing the chances for individual investors to win subscriptions for popular new stocks. However, in contrast, the success rate for new stocks in October was exceptionally high, exceeding 90%. Among the 12 listed companies, 11 performed better than their offer prices on the first day of listing.Among them, the 'most oversubscribed' stock $GOLDEN LEAF INT (08549.HK)$closed over 300% higher than its offer price on the first day. Those who successfully subscribed to $CF PHARMTECH (02652.HK)$ could earn nearly HKD 12,000 from one lot on the first day.

Reviewing the 27 stocks listed between the implementation of the new mechanism and November 3rd, 25 of them closed higher than their offer prices on the first day, with a first-day gain probability exceeding 90% and an average first-day rise of over 87%. Comparing this with the 27 new stocks listed prior to the implementation of the new mechanism, only 19 closed higher than their offer prices on the first day, with a first-day gain probability of around 70% and an average first-day rise of less than 20%.

Looking at the overall performance of Hong Kong's IPO market this year as of October 31st, over 70% of new stocks performed exceptionally well on their first day of listing, with each lot yielding a minimum profit of over HKD 4,000, which is highly attractive.

Tip:Many investors use margin financing to subscribe for more new shares in order to increase their chances of winning an allocation. For those who do not receive an allocation, there is no need to be disappointed—Futu's proprietary dark pool trading allows participation before the official listing; as for those fortunate enough to be allocated new shares, there are also multiple options available if they wish to take profits.

Analyze the reasons behind this year’s strong IPO market

Interviewee Tang Niu expressed considerable satisfaction with this year’s IPO market performance, stating thatthis is the strongest performance seen in four or five years.The IPO performance observed this year has indeed been remarkable, often seeing increases of one or even two times. If aligned with market themes, companies currently listed in Hong Kong are highly relevant to investment trends, such as in artificial intelligence or biomedicine-related sectors.

A distinctive feature of this year’s robust IPOs is that after achieving a doubling in value, these stocks continue to exhibit upward momentum, with more IPOs showing sustained strength. Tang Niu believes there are two key factors:

Strong performance of the Hong Kong stock market: A heated market naturally boosts investor sentiment. After investors profit, if they have sufficient capital, they are more willing to seek new investment opportunities, leading to greater enthusiasm for newly listed stocks.

Regulatory reformsThe clawback mechanism has improved, leading to more concentrated allocations. It can be observed that regardless of whether it is a large or small initial public offering (IPO), the gains have been significantly higher than in the past. Investors, after profiting, continue to participate in subscriptions, creating a fairly positive cycle.

The new system has both advantages and disadvantages. Under the new framework, IPO price increases have indeed become more substantial, and the incidence of stocks falling below their issue price has decreased significantly.

Practical Strategies: How to Increase the Odds of Winning an Allocation? What to Do if Not Allocated?

To increase the chances of winning an allocation, one can adoptthe 'whole-family mobilization' approach,where all family members aged 18 years and above open accounts to participate in IPO subscriptions, thereby increasing the probability of winning an allocation. Of course, it is also necessary to utilizemargin financing for subscriptions,but this must be assessed based on one’s financial situation and risk tolerance.

When using margin financing for subscriptions, it is important to check if a clawback mechanism is in place.In the absence of Mechanism B, the probability of winning an allocation is relatively higher.At the same time, observe the oversubscription ratio; if it is only over-subscribed by more than a hundred times, caution is warranted.Typically, when applying for subscription via margin financing, if the oversubscription ratio exceeds a thousand times, the chances of being allotted shares are relatively lower, making the use of margin financing more effective in such cases.

If the application does not result in an allotment and there is an intention to chase the price post-listing, it is advisable to monitor the performance in the first two days after listing. Pay attention to whether a bullish candle pattern emerges, ensuring at least the ability to buy back from a lower position. Next, observe whether consecutive bullish candles continue to form. Most importantly, be cautious of any sudden appearance of a bearish candle or the formation of a very long upper shadow, indicating selling pressure at higher levels.These are technical patterns that require special attention when unable to subscribe to new shares and subsequently opt to trade post-listing.

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