Hong Kong’s stock exchange operator has announced a strong first-half net profit of HK$6.31 billion ($807 million), a 31 percent increase from the same period last year. Despite global market fragility affecting IPO activity, the Hong Kong Exchange (HKEX) reported a revenue growth of 18 percent to $1.4 billion. This impressive revenue result was attributed to a net investment income of $345 million driven by high interest rates and the strong performance of its external portfolio. However, new listings in the first six months only raised $2.3 billion, down nine percent from the previous year and a significant decline from the peak levels of 2020 when IPOs raised $51 billion.
The success of HKEX comes as Hong Kong emerges from the shadow of its strict zero-Covid policy, which had a negative impact on international investors and the wider economy. Additionally, the bourse faced a decrease in new listings from China’s mega-companies due to Beijing’s regulatory crackdown on the property and technology sectors. However, HKEX recently abolished a rule that required mainland Chinese firms to discuss the differences between the laws and regulations in China and Hong Kong in their listing documents. The move was aimed at standardizing disclosure practices for all companies, regardless of where they incorporate.
HKEX remains committed to the London Metal Exchange (LME) despite recent nickel trading scandals. The bourse sees the LME as a valuable institution and looks forward to progress in initiatives making the market more resilient. In addition, HKEX has signed cooperation agreements with stock exchanges in Saudi Arabia, Indonesia, and Beijing, with the possibility of cross-listing in some cases. The exchange is also focused on diversifying its product lineup, including derivatives, to reduce dependence on the cash market.
Although the IPO market showed signs of good momentum in the second quarter, HKEX experienced a 14 percent year-on-year decrease in average daily turnover of equity products in the first half. The stock price of HKEX has also declined by around 13 percent since the beginning of the year. However, the exchange is optimistic about the future, with 104 active applications for new listings as of June and a healthy pipeline of potential IPOs.
