Hong Kong Exchanges and Clearing (HKEX) reported its best quarterly earnings on record, as a booming stock market and a surge in initial public offerings (IPOs) lifted the world’s most valuable financial market place operator. The stock fell. Net income jumped 70 per cent to HK$3.84 billion (US$494.7 million), or HK$3.03 per share in the three months to March 31, trailing the HK$4.11 billion consensus in a Bloomberg survey of analysts. Revenue for the quarter jumped 49 per cent to HK$5.96 billion, beating market forecasts of HK$5.93 billion. “HKEX has had a strong start to 2021,” the exchange’s interim chief executive officer Calvin Tai said in a statement. “This was driven by a buoyant IPO market and very robust trading volumes, with headline average daily turnover and stock connect having their best quarter ever.” HKEX shares dropped 0.2 per cent to close at HK$488.8 after the earnings report. They have surged 96 per cent over the past 12 months, outpacing the Hang Seng Index’s 18 per cent advance. Core business revenue increased 35 per cent to HK$5.49 billion as trading and settlement fees rose on the back of an 86 per cent surge in market turnover to an average of HK$224.4 billion every day, buoyed by an inflow of global capital seeking better returns, and Chinese funds seeking value. Total listing fees rose 20 per cent to HK$591 million during the first three months of the year, it added. The exchange hosted 32 IPOs which raised HK$136.6 billion of proceeds, a ninefold jump from a year earlier. HKEX also generated a net investment income of HK$418 million during the quarter from its portfolio of global stocks and bonds, reversing a HK$47 million loss a year earlier. “Set against a challenging economic and geopolitical backdrop, we continue to execute on our Strategic Plan 2019- 2021, driving performance and delivery, demonstrating our resiliency and remaining responsive to both the needs of our customers and the broader market,” Tai said. “We continue to manage our costs and risks and I am confident we remain well-placed to capture future growth opportunities.” The city’s bourse, the world’s top destination for IPOs in seven of the past 12 years, benefited from several mega stock sales and secondary listings this year, such as Kuaishou Technology’s US$5.4 billion stock offer in January, and Baidu’s US$3 billion secondary listing in March. More listings are being lined up following additional reforms to accommodate US-listed technology giants. The city became a magnet for US-listed Chinese firms as they hedged against heightened political and accounting concerns. E-commerce platform operator JD.com and gaming giant NetEase were among 144 listings in 2020 that raised US$51.6 billion in proceeds, according to Bloomberg data. Two Stock Connect schemes with mainland bourses contributed to an 82 per cent surge in revenue to HK$737 million from a year earlier. Offshore investors traded 63 per cent more of A shares listed in Shenzhen and Shanghai last quarter, based on the average daily turnover of so-called northbound trading. On the reverse southbound flow, volume surged almost three folds to HK$60.8 billion per day, according to HKEX. HKEX’s costs during the first three months rose 9 per cent to HK$1.1 billion as a result of higher staff and IT expenses. The exchange will face more challenges later this year as trading costs rise after the government increases stamp duty from August 1. Nicholas Aguzin , a former JPMorgan private banking chief in the region, will take over as chief executive from May 24. He replaces Charles Li Xiaojia who stepped down in December. The HKEX may find it hard to continue to break records in the rest of this year, according to analysts. “The average daily turnover has gone down in April while many mega tech giants have held up their listing plans due to the new regulatory requirements,” said Louis Tse Ming-kwong, managing director of Wealthy Securities. Turnover dropped to below HK$200 billion per day for most of April, compared with average daily turnover of HK$224.4 billion in the first quarter, according to exchange data. “The recent market fluctuation has affected the turnover. It is expected that HKEX’s quarterly growth in the second quarter may not be able to continue the strength of the first quarter,” said Kenny Ng Lai-yin, a strategist at Everbright Sun Hung Kai. However, Ng belives the IPO market will pretty active for the rest of 2021, which will provide support for HKEX’s annual results.