HKEX reports its best second quarter on record as IPOs, stock trading revive in Hong Kong

Hong Kong Exchanges and Clearing Limited (HKEX) reported its best second quarter on record, as initial public offerings (IPOs) and stock trading returned amid a leadership change at the city's bourse.

Net profit at the operator of the world's fourth-largest stock market rose 9 per cent to HK$3.16 billion (US$405 million), or HK$2.49 per share, in the three months ended June, in line with market estimates. Sales increased 8 per cent to HK$5.4 billion during the quarter, also meeting analysts' forecasts.

The results were the market operator's first quarterly growth in nine months, marking an auspicious start for Bonnie Chan Yiting, who took over as HKEX's chief executive in March. Carlson Tong Ka-shing, a veteran accountant and regulator, took over as the exchange's chairman on April 24.

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HKEX shares dipped 0.4 per cent to HK$231 at the noon trading pause in Hong Kong before the exchange reported its earnings. The stock has fallen by 14 per cent this year.

CEO Bonnie Chan spoke at the listing ceremony of Black Sesame Holdings on August 8. 2024. Photo: Jonathan Wong alt=CEO Bonnie Chan spoke at the listing ceremony of Black Sesame Holdings on August 8. 2024. Photo: Jonathan Wong>

Hong Kong's benchmark Hang Seng Index rose 7 per cent in the second quarter, recovering from a 14-per cent slump in 2023 and a 3-per cent decline in the first three months.

Listing activity returned to the city that was the world's top IPO destination in seven of the previous 15 years. Eighteen companies, including the artificial intelligence-powered drug researcher QuantumPharm, raised a combined HK$8.6 billion during the second quarter, 79 per cent more than the first three months, according to HKEX data.

More shares changed hands in the second quarter, as the average daily trading turnover rose 18 per cent from last year to HK$102.7 billion, boosting the HKEX's fee income by 7 per cent. The active transaction was a gain of 22 per cent from the HK$99.4 billion of transactions in the first three months of the year.

"HKEX had a robust first half, with the second quarter seeing an upswing in market momentum and trading activity, driving record second quarter revenue and other income and profit," Chan said in a statement. "Fundraising activity remained resilient and has shown signs of warming, with the second quarter seeing a 50 per cent quarter-on-quarter increase in new listings and a 79 per cent increase in IPO funds raised."

Hong Kong's capital market, which had wallowed in a bear market for three years during the Covid-19 pandemic, spiked in mid-April after China unveiled five stimulus measures, including supporting qualified industry leaders to raise funds in Hong Kong, and easing the eligibility criteria for exchange-traded fund products under its Connect scheme.

Speaking in his first result statement as HKEX chairman, Tong promised to double down on reforms at the exchange "to improve market efficiency and trading dynamics, which will ultimately benefit both institutional and retail investors, as well as market participants."

"We made good progress in expanding our Connect programme to deepen our mutual market connectivity, supporting the long-term sustainable development of Hong Kong and mainland China's capital markets," Tong said.

HKEX booked a HK$366 million gain from its investment portfolio of global stocks and bonds during the reporting period, 37 per cent higher than a year earlier.

The average daily turnover of derivatives trading in the second quarter also expanded to 818,000 contracts per day, a 14 per cent growth from last year.

Still, the strong second quarter could not offset the weaker performance in the first three months of 2024. HKEX's first-half profit fell 3 per cent to HK$6.13 billion, or HK$4.84 per share, due to the 13 per cent decline in the first-quarter net income.

HKEX will pay an interim dividend of HK$4.36 per share, 3 per cent less than a year earlier.

"The strong performance of HKEX in the second quarter is mainly driven by the rise in market trading volume and higher number of new listings," said Kenny Ng Lai-yin, a strategist at Everbright Securities International. "Looking ahead, investors are likely to pay more attention to whether the HKEX will introduce more new reform measures amid the current downturn in the new stock market."

"The recent stock market downturn may lead to a weaker performance in the IPO market in the third quarter but this situation may improve in the fourth quarter," Ng said.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright ? 2024 South China Morning Post Publishers Ltd. All rights reserved.

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