HK bourse sees drop in quarterly profit as IPOs slow

Hong Kong

HONG Kong Exchanges & Clearing (HKEX) reported a drop in profit in the second quarter as a boom in initial public offerings (IPOs) and trading at the start of the year waned.

Net income fell to HK$2.77 billion (S$484 million), compared with the HK$2.97 billion a year earlier, according to Bloomberg calculations from its first-half statement. Profit rose 26 per cent in the first six months in the year.

"The macro backdrop will remain challenging in the months ahead, but we remain resolutely focused on continuing to enhance the attractiveness of our markets, responding to the needs of our customers and driving our business forward," chief executive officer Nicolas Aguzin said in his debut earnings statement since taking the job in May.

After a boom in IPOs and trading over the past year, activity slowed in Q2, raising investor concerns over the bourse's outlook for the rest of the year. The city's first stamp-duty hike since 1993, which contributed to a sell-off in Hong Kong's US$6.5 trillion market and sent HKEX shares tumbling earlier this year, also took effect from this month.

In Q2, new listings raised a total of HK$74.8 billion on the exchange, a 4 per cent drop from a year earlier, the bourse has said.

China's plan to overhaul the way it regulates overseas IPOs as part of broad campaign to tighten oversight of companies such as Didi Global and ByteDance may benefit Hong Kong. Beijing plans to exempt companies going public in Hong Kong from first seeking the approval of the country's cybersecurity regulator, removing one hurdle for businesses to list in the Asian financial hub instead of the United States, according to people familiar with the matter.

Shares of HKEX have gained 22 per cent this year, outperforming the benchmark Hang Seng Index. Analysts had an average 12-month target price of HK$544.88, implying an upside of 5.3 per cent. BLOOMBERG