HKEx chief 'not losing sleep' over slowing IPOs

Exchange enters new asset classes as listings and trading volumes reflect market sentiment

PUBLISHED : Friday, 01 March, 2013, 12:00am
UPDATED : Friday, 01 March, 2013, 5:17am

Hong Kong Exchanges and Clearing's expansion into new asset classes meant slowing initial public offerings were not a concern, said Charles Li Xiaojia, chief executive of the No 1 bourse operator by market value.

Listings and average daily trading volumes reflected market sentiment, which was why the company was entering new asset classes, Li said.

HKEx bought the London Metal Exchange, which handles trading of 83 per cent of global base metals futures, for £1.39 billion (HK$16.31 billion) in December.

The bourse operator on Wednesday reported its lowest quarterly profit since the global financial crisis and fifth consecutive decline in three-month earnings. Companies raised US$8 billion through IPOs in Hong Kong last year, the least since 2003 and down 63 per cent from 2011, according to data compiled by Bloomberg.

"People somehow always associate [the] Hong Kong exchange with IPOs," Li said. "I'm not losing sleep over IPOs. This whole change and shift away from cash equity is to make sure we actually lock ourselves in - real global leading exchanges are not IPO markets. Many of the pure cash equity exchanges in the world are really faltering."

Global equity volumes plunged last year, squeezing exchanges as slowing economic growth in China and the US and Europe's sovereign-debt crisis sapped investor confidence.

HKEx's net income fell 32 per cent to HK$864 million in the fourth quarter, from HK$1.27 billion a year earlier, according to figures derived from the full-year statement. That compares with the average HK$1.11 billion estimate of three analysts in a survey. The result was the worst since the first quarter of 2009.

For the full year, net income fell 20 per cent to HK$4.08 billion, or HK$3.74 a share, from HK$5.09 billion, or HK$4.70 a share, a year earlier. That compares with the average HK$4.29 billion estimate of 20 analysts.

HKEx will introduce after-hours futures trading on April 8, a move it says is necessary and will allow investors to hedge and adjust positions when news breaks in European hours. Local brokers are concerned that changes to Hong Kong's market structure, also including longer trading hours and the reinstatement of a closing auction, will mean they can't compete.