Wall Street on the Sidelines: Foreign Retail Investors Locked Out as China’s Mainland IPOs Deliver Record Run

Mainland China's IPO market is hitting historic highs while international retail money watches from the sidelines.

The Great Wall of Capital

Foreign retail investors face a familiar barrier: regulatory gates remain firmly shut. While institutional players navigate Qualified Foreign Institutional Investor (QFII) channels, the average global investor is left with indirect exposure—if any at all.

A Domestic Engine at Full Throttle

The record run isn't fueled by foreign cash. It's a homegrown surge, powered by domestic liquidity and investor appetite. The market's resilience highlights a system that can achieve blistering performance while operating largely within its own ecosystem.

The Price of Exclusion

Missing out on a record run stings. For foreign retail, the opportunity cost is a stark reminder of market fragmentation. It's the financial equivalent of seeing a party through a locked window—you can hear the celebration, but you can't get in. (The cynical take? Traditional finance builds higher walls while decentralized finance builds more doors.)

This dynamic creates a paradox: one of the world's most vibrant public offering markets thrives in relative isolation. As the records stack up, the question for locked-out investors shifts from 'how to get in' to 'what opportunities are being created elsewhere.'

Only select foreigners qualify for direct A-share trading

Shanghai city government guidelines lay out who can directly open brokerage accounts for A-shares—that’s what stocks listed on mainland Chinese exchanges are called. Only certain foreigners qualify. People with permanent resident status can do it. So can foreigners working in China, or those working abroad who get equity compensation at A-share listed companies.

A lot of global investors use Stock Connect instead. It’s a program that links Hong Kong and mainland Chinese exchanges so they can access each other’s stocks. The system lets overseas investors buy A-shares through Hong Kong brokers. No onshore account needed, no special licenses required.

But it doesn’t help much with initial public offerings or newly listed companies. Plus Hong Kong brokers have their own rules about who can participate, like minimum account balances and risk disclosure forms.

Theodore Shou is chief investment officer at Skybound Capital. “Stock Connect does not work because newly listed stocks are not included in Stock Connect as yet. Usually, it takes a few weeks to months should the stocks qualify,” he said.

Newly listed stocks face months-long wait for stock connect inclusion

Companies have to meet certain standards to get into the Stock Connect program. Things like enough trading activity and market value. That usually means they need some time to build up trading history and data before qualifying.

Northbound trading is what they call it when overseas and Hong Kong investors buy mainland China stocks through Stock Connect and other programs. Shou said it won’t be available until “typically several months after any listing.” And even then, Moore Threads and MetaX might not get included.

Overseas retail investors do have one option, though it’s limited. They can use offshore funds that invest in A-shares. Foreign retail investors interested in STAR Market IPOs like Moore Threads and MetaX can put money into funds based outside China that buy A-shares, Shou explained. These funds usually participate in IPOs.

China’s STAR Market is Shanghai’s tech board, kind of like the Nasdaq. It focuses on strategic sectors—semiconductors, artificial intelligence, biotech. The board has looser profitability requirements but stricter rules for foreign retail investors.

But Shou added a warning. “However, such participation will be indirect, very limited, and mostly non-meaningful.” The IPO allocations are often tiny compared to what the fund holds overall.

The performance numbers show what foreign investors are missing out on. The CSI 300 Information Technology Index tracks information technology companies within China’s CSI 300. It’s up 32% year to date. Compare that with the benchmark CSI 300, which has risen 17%. Hong Kong’s Hang Seng Tech Index has gained 24% so far this year.

Want your project in front of crypto’s top minds? Feature it in our next industry report, where data meets impact.