HONG KONG, China – Hong Kong’s stock exchange operator, HKEX, reported a remarkable first-half net profit of HK$6.31 billion ($807 million) on Wednesday, representing a 31% increase compared to the same period last year. This impressive performance is particularly notable considering the impact of global market fragility on IPO activity.
Despite the continued global macro uncertainty, HKEX had a successful half-year and achieved strong revenue growth, with a year-on-year increase of 18% to $1.4 billion, making it the second-best revenue result in the exchange’s history.
This revenue success can be attributed to a net investment income of $345 million, driven by high interest rates, as well as the excellent performance of HKEX’s external portfolio.
In its announcement, HKEX acknowledged that Hong Kong Cash Market trading volume and IPO activity were affected by global market fragility in the first half of 2023. Nevertheless, compared to the weak global IPO market, Hong Kong performed relatively well.
Despite these positive results, the first six months of this year saw a decline in new listings, with only $2.3 billion raised, a decrease of 9% compared to the previous year. This is a significant contrast to the record-breaking year of 2020, when IPOs raised a staggering $51 billion.
Covid and Regulatory Crackdowns
Hong Kong’s bourse has recently emerged from the strict zero-Covid policy that caused instability and apprehension among international investors, leading to an adverse impact on the broader economy.
In addition to the challenges posed by the pandemic, the bourse also faced a decline in new listings from Chinese mega-companies due to Beijing’s regulatory crackdown on the property and technology sectors.
Addressing concerns about disclosure practices, HKEX recently eliminated a rule requiring mainland Chinese firms to discuss legal differences between China and Hong Kong in their listing documents. This decision aims to standardize disclosure practices for all companies, regardless of their place of incorporation.
During a press conference, HKEX CEO Nicolas Aguzin emphasized that this change does not imply a relaxation of disclosure requirements. He stated that all companies listing on HKEX must still provide detailed disclosure of jurisdictional and material risks they face.
Commitment to LME and Expansion Plans
Aguzin reaffirmed HKEX’s commitment to the London Metal Exchange (LME) despite recent scandals in nickel trading. He expressed confidence in the future of LME and emphasized the importance of making the market more resilient.
HKEX also made significant progress in strengthening international partnerships by signing cooperation agreements with stock exchanges in Saudi Arabia, Indonesia, and Beijing. Cross-listing opportunities are being considered as part of these collaborations.
Focusing on diversification, HKEX aims to expand its product lineup, including derivatives, to reduce reliance solely on the cash market.
HKEX’s announcement also highlighted optimistic signs for the IPO market, particularly in the second quarter, with 104 active applications for new listings as of June. Aguzin expressed satisfaction with the encouraging revival of the IPO market and the existence of a robust pipeline.
However, the first half of the year saw a 14% decline in average daily turnover of equity products, reflecting market trends. Additionally, the bourse’s stock price has dropped approximately 13% since the beginning of the year.
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