A dearth of initial public offerings in Hong Kong is causing companies to suffer cash crunches and put off expansion plans, showing how the steep market downturn is taking a toll on businesses that need to raise money.

The Asian financial hub was for years the top international fundraising venue for companies from China and the broader region and came close to rivaling New York a few years ago. But a prolonged stock-market slump in Hong Kong and an exodus of foreign investors have made it exceedingly difficult for many companies to go public. Chinese regulators have also been sitting on many IPO applications, creating another barrier for businesses to overcome.