Hong Kong Exchanges and Clearing Q1 2024 Profit Falls 13% Amid Decline in Listings and Trading

Hong Kong Exchanges and Clearing (HKEX) reported a 13% decline in its first-quarter profit for 2024, with net income falling to HK$2.97 billion (US$379 million). The drop was attributed to a decrease in listings and trading activity, as the exchange operator faced a challenging market environment with reduced investor appetite and a slowdown in initial public offerings (IPOs) in Hong Kong.

HKEX's revenue in the first quarter fell 6% to HK$5.2 billion, mainly due to shrinking trading and listing fee income. The bourse operator said its IPO pipeline remained healthy with 85 active applications, though total IPO fundraising in the first three months was down 30% from a year ago to HK$4.7 billion, the smallest such fundraising since 2009.

The Hong Kong stock market has experienced a downturn in IPOs, with proceeds hitting a two-decade low in 2023 and a slow start in 2024. This slump contributed to a nearly 60% drop in HKEX shares from early 2021 and a four-year decline in the city's benchmark index.

Why this matters: The decline in HKEX's profit and the overall slowdown in Hong Kong's stock market highlight the challenges faced by the exchange amid geopolitical tensions, China's economic struggles, and reduced investor confidence. The performance of HKEX, as a major global financial hub, serves as a barometer for the broader economic and market sentiment in the region.

Despite the challenges, newly appointed CEO Bonnie Chan expressed optimism about leveraging growth opportunities in China, Southeast Asia, and the Middle East, as well as advancements in technology. "While the cash market remained soft, there was a notable uptick in average daily trading in March and April, indicating growing investor confidence," Chan noted.

To support the Hong Kong market, China's top regulator announced initiatives, including the promotion of mainland company listings in Hong Kong and the expansion of the Stock Connect trading link. Mainland Chinese investors have significantly increased their presence in the Hong Kong stock market, with their daily average turnover reaching a record high and accounting for a third of total turnover.

Key Takeaways

• HKEX Q1 2024 profit down 13% due to decline in listings and trading activity.
• Hong Kong IPO fundraising in Q1 2024 down 30% to HK$4.7B, lowest since 2009.
• HKEX CEO optimistic about growth opportunities in China, SE Asia, and Middle East.
• China's regulator promotes mainland company listings in Hong Kong, expands Stock Connect.
• Mainland Chinese investors account for a third of Hong Kong stock market turnover.