HKEX posts biggest quarterly profit drop in five years as IPOs and stock trading dry up amid Hong Kong’s Covid-19 slump

The exchange’s net profit fell to HK$2.67 billion, or HK$2.11 per share, in the first three months

Average daily transactions on the exchange shrank by 35 per cent to HK$146.53 billion during the first quarter, sending HKEX’s core business revenue tumbling by 16 per cent

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A general stock exchange pictrure in Central on 3 March 2020. Photo: Martin Chan

Published: 1:19pm, 27 Apr 2022Updated: 7:56pm, 27 Apr 2022

Hong Kong Exchanges and Clearing Limited (HKEX) reported its biggest decline in quarterly earnings in more than five years, as the city’s stock market operator posted an investment loss, while a dearth of initial public offerings (IPO) and low transactions sapped fee income in the first three months of 2022.

Net profit fell 31 per cent to HK$2.67 billion (US$340.29 million), or HK$2.11 per share, in the first three months, worse than the HK$2.96 billion expected in Bloomberg’s analysts survey. Revenue fell 21 per cent to HK$4.69 billion, missing expectations by 4.8 per cent.

“Throughout the first quarter, HKEX showed its robustness and resiliency despite ongoing market volatility and geopolitical fragility,” HKEX’s chief executive Nicolas Aguzin said in a statement. “However, we were not immune to global market sentiment which resulted in some softness in the IPO market, reduced valuations in our investment portfolio and pricing volatility in our commodities market.”

The earnings slump puts pressure on Aguzin and the blueprint he unveiled last month to reinvigorate the world’s fourth-largest financial marketplace. Under the plan, HKEX will launch a new digital trading platform and expand the transborder investment channels with mainland China to include exchange-traded funds (ETFs).

HKEX CEO Nicolas Aguzin during HKEX 2022 Corporate Day on 29 March 2022. Photo: Handout

HKEX shares dropped 0.1 per cent to HK$321.4 in after the results were announced. The stock has fallen by 34 per cent over the past 12 months, tracking the 31 per cent decline in the benchmark Hang Seng Index.