Hong Kong stock exchange posts record profit on trading, IPO boom

The Hong Kong-based stock operator posted its best quarterly profit ever as a flood of transactions and initial public offers boosted the stock market before a new chief executive took the lead.

Hong Kong Exchanges and Clearing said on Wednesday that after-tax profits jumped 70% year-on-year in the first quarter to reach HK $ 3.8 billion ($ 490 million), with core business revenue drawn by record sales and expenses of 5.5 billion Hong Kong dollars. Investment income reached a gain of HK $ 418 million after a loss in the first quarter of 2020.

The stock market’s performance in the first quarter benefited from a series of high-profile IPOs by Chinese technology companies, including that of the short video platform Kuaishou, which raised over $ 5 billion in February.

Chinese groups that trade in New York added to the flow of large share sales in Hong Kong this year. Technology groups Baidu and Bilibili were among the companies that launched secondary listings in the city as US regulators prepared to forcibly remove groups which did not comply with national accounting requirements.

“HKEX has had a good start to 2021,” said Calvin tai, Interim Managing Director, who underlined “a buoyant IPO market and very robust trading volumes. . . in a difficult economic and geopolitical context ”.

HKEX shares, which have doubled in the past 12 months, were little changed in the afternoon in Hong Kong after the results were announced.

Hong Kong’s position as an Asian financial center has been challenged after Beijing imposed a draconian national security law on the city last year.

But the efforts of rival Shanghai and Shenzhen stock exchanges to internationalize, long a concern for HKEX, have made only limited progress. Growing hostility to China in Washington has bolstered Hong Kong’s role as an offshore fundraising center for Chinese companies.

“Hong Kong is still an offshore market when it comes to mainland China. Close to the open sea but still offshore, ”said an HKEX insider. The Shanghai Stock Exchange’s internationalization plans are unlikely to undermine Hong Kong as the domestic market still suffers from a lack of capital convertibility for companies wishing to raise currencies other than the offshore renminbi ”.

HKEX’s profits were also boosted by trades from mainland Chinese investors in Shanghai and Shenzhen, which have bought stocks in the Hong Kong market through so-called stock connect programs.

HKEX reported an average daily turnover of nearly HK $ 61 billion via mainland investors in the first three months of 2021, helping to push the exchange’s total daily turnover. to a record HK $ 224 billion.

Trading by international investors in Chinese stocks and bonds through the connection programs has also reached record highs, with daily turnover climbing to 127 billion Rmb ($ 20 billion) and 25 billion Rmb respectively.

But Louis Tse, chief executive of brokerage firm Wealthy Securities, said revenue fell early in the second quarter as mainland investor trading cooled and Beijing cracked down on Chinese tech groups, many of which trade in Hong Kong.

“The [record regulatory] the sanction for Alibaba sent a shock wave through tech stocks, ”Tse said. “It cooled the speculative mood in the market and reduced sales.”

Tai, the acting general manager, was tasked with leading the exchange after the departure of predecessor Charles Li, who held the position for a decade and pioneered the Equity and Bond Connection Programs.

Nicolas Aguzin, former senior banker at JPMorgan, is ready to take the reins at HKEX in May.

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