Hong Kong Exchanges and Clearing's first-half profit rises 31% despite IPO slump

HONG KONG, China – Hong Kong's stock exchange operator on Wednesday reported a “strong” first-half net profit of HK$6.31 billion ($807 million), up 31% from the same period last year, even as IPO activity was affected by “global market fragility.” .

Nicolas Aguzin, chief executive of the Hong Kong Stock Exchange, said in the financial report that “despite continued global macroeconomic uncertainty, this has been a good half-year for the Hong Kong Stock Exchange.”

Revenue in the first half of the year increased 18% year-on-year to US$1.4 billion.

The exchange attributed the strong revenue performance (“second best ever”) to $345 million in net investment income driven by high interest rates and strong performance from its external investment portfolio.

“In the first half of 2023, Hong Kong's spot market trading volume and IPO activity continued to be affected by global market vulnerabilities,” HKEX said in the announcement.

“The global IPO market is weak, but Hong Kong is performing relatively well.”

Despite this, only $2.3 billion was raised in new listings in the first six months, down 9% from the same period last year.

The figures also contrast sharply with the peak level of $51 billion raised in IPOs in 2020.

COVID-19, repression

Hong Kong's exchange has only recently emerged from the shadow of the city's strict zero-COVID policy, which spooked international investors and weighed on the broader economy.

New listings by China's largest companies have dried up in recent years as Beijing has cracked down on regulations in the real estate and technology industries.

The exchange last month scrapped a rule requiring mainland Chinese companies to discuss “material differences between the laws and regulations” of mainland China and Hong Kong in listing documents.

Aguzin said at a news conference on Wednesday that the move was to standardize disclosure practices for companies regardless of where they are registered.

“We are not relaxing all disclosure requirements,” he said.

“Any company listed on our market is required to disclose in detail the legal risks and material risks it may face.”

‘Committed’ to the London Metal Exchange

Aguzu also said that despite the impact of the recent nickel trading scandal, the Hong Kong Exchange remains “committed” to the London Metal Exchange (LME) and sees “continued confidence and trust”.

“We think this is a great agency and look forward to… progress on all the initiatives they are taking to make the market more resilient,” he added.

Aguzin said the exchange signed cooperation agreements with stock exchanges in Saudi Arabia, Indonesia and Beijing this year and was considering cross-listing in some cases.

He added that HKEX wanted to continue to diversify its product lineup to include derivatives so it “doesn't just rely on the spot market”.

Hong Kong Exchanges and Clearing said in results released on Wednesday that the IPO market showed “signs of good momentum” in the second quarter, with 104 new listing applications active as of June.

“We are pleased to see encouraging signs of recovery in the IPO market, along with a very healthy pipeline,” Aguzin said.

The average daily trading volume of equity products in the first half of the year decreased by 14% year-on-year.

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Shares of the exchange have fallen about 13% since the beginning of the year.

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