Hong Kong stock exchange’s profits fall sharply as chief departs

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Hong Kong Exchanges and Clearing reported a sharp fall in fourth-quarter profits on the back of subdued trading and fewer new listings for the stock exchange, as outgoing chief executive Nicolas Aguzin acknowledged “turbulent” geopolitical and macroeconomic conditions.

Profits at HKEX during the three months to the end of December fell 13 per cent as average daily turnover for equities — a key driver of revenues — dropped 29 per cent year on year to HK$80.4bn (US$10.3bn), even after Hong Kong’s government took special measures to boost market liquidity.

The quarterly results draw a line under the nearly three-year term of Aguzin, whose tenure began just weeks before the start of a regulatory crackdown on tech groups in China that cut off a lucrative trade in offshore listings.

Slowing growth in mainland China and rising tensions with the US have also sapped global investors’ appetite for the bourse’s most prominent stocks over the past year.

Aguzin, a former star banker at JPMorgan, said while “the macroeconomic and geopolitical environment remains turbulent, we are cautiously optimistic that, as sentiment improves, we are well placed to capitalise on the global pivot to Asia”.

However, funds raised by initial public offerings fell 56 per cent last year, due in part to slowing economic growth in China, as well as a liquidity crisis in the mainland’s property sector and rising tensions between Beijing and Washington.

Line chart of Market capitalisation ($bn) showing HKEX sheds $38bn in market value under Aguzin

Those factors have prompted global investors to look elsewhere in the region — such as Japan and India — for higher returns, sapping Hong Kong’s market of liquidity. Trading activity has remained subdued despite a string of supportive measures from Hong Kong’s government, including a cut to the stamp duty on stock trades in the city.

Those muted trading conditions weighed on deal flow throughout the year, with companies raising just $5.7bn from IPOs in 2023 — the smallest total in more than two decades, according to Dealogic data.

So far this year, only five companies have listed in Hong Kong, raising a combined $279mn and reflecting a year-to-date drop of about 18 per cent from a year ago.

Shares in HKEX fell 0.6 per cent to HK$243.40 following the release of results on Thursday and are down more than 9 per cent this year. The company’s stock has fallen about 43 per cent since the start of Aguzin’s term, reflecting a loss of more than $38bn in market capitalisation.

Aguzin will be replaced by Bonnie Chan, HKEX’s co-chief operating officer, on Friday, months ahead of the scheduled end of his three-year term.

Laura Cha, HKEX’s chair, said the bourse remained “resolutely focused on building on our unique role in connecting China and the world”. She added that the exchange would benefit from incoming chief executive Chan’s “extensive capital markets experience and her excellent understanding of HKEX’s business and competitive landscape”.

Michael Zhang, an analyst at Citigroup, said the results were “mixed,” noting that while core revenues had not fallen as much as anticipated, a rise in operating expenditures had also outstripped expectations.

He added that analysts’ median forecast for average daily turnover of HK$166bn this year was also higher than the year-to-date average of just HK$92bn, “suggesting further downside risks”.


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