The stock exchange manager’s profit in Hong Kong will fall in the first quarter due to weaker listings, according to Reuters

By Selena Li

HONG KONG (Reuters) – Hong Kong’s stock exchange operator reported a 13% drop in first-quarter profit on Wednesday as sluggish trading and muted listing activity weighed on its business.

Profit attributable to shareholders of Hong Kong Exchanges and Clearing Ltd (HKEX) fell to HK$2.97 billion ($379 million), but was slightly above LSEG analyst forecasts of HK$2.82 billion.

The profit decline underlines the challenges ahead for HKEX, which has suffered from Beijing’s crackdown on a wide range of industries since late 2020 and has struggled to revive listings and trading amid geopolitical tensions and economic volatility.

The stock market, once the world’s top destination for IPOs, fell to 10th in terms of money raised through IPOs in the first quarter, according to data from Deloitte.

Profits for the exchange operator rose in the four quarters from October 2022 to September 2023, mainly thanks to gains from its own mutual funds and a low base for the corresponding periods a year ago. As of October 2023, sluggish trading and static listing activity has reduced revenues.

HKEX announced major leadership changes this year, with Bonnie Chan taking over as CEO in March and the board set to elect a new chairman later today as it looks to improve performance.

Chan said in a statement that “despite the prevailing backdrop, she was “optimistic about HKEX’s ability to capitalize on China’s long-term growth and its significant opportunities to connect with the fast-growing capital hubs of Southeast Asia and the Middle East” .

HKEX’s revenue fell 6% to HK$5.2 billion in the first quarter, mainly due to declining revenue from trading and listing fees.

However, the exchange operator said its IPO pipeline remained “healthy” with 85 active filings.

In the first three months, 12 companies raised a total of HK$4.7 billion through IPOs, a 30% decline from a year ago and the smallest fundraising since 2009, Deloitte data showed.

Larger listings in Asia’s financial hub remain elusive Alibaba.com (NYSE:) decided last month to abandon its logistics unit’s IPO plan, citing poor market prospects.

The HKEX-owned London Metal Exchange saw trading and clearing fees rise 40% and 39% respectively in the first quarter, due to brisk activity in metals derivatives trading.

($1 = 7.8339 Hong Kong dollars)