Yahoo Finance HKEX’s 13% Drop in Profit Shows Challenges for New CEO Chan
(Bloomberg) -- Hong Kong stock exchange’s profit slid 13% in the first quarter, underscoring the uphill battle faced by new Chief Executive Officer Bonnie Chan as she navigates a moribund landscape for trading and stock offerings.
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Hong Kong Exchanges & Clearing Ltd. reported net income of HK$2.97 billion ($379 million) in January through March, according to a public filing Wednesday. That beat the consensus estimate of HK$2.81 billion in a Bloomberg survey of analysts. Core revenue slid 7% in the period.
“Looking ahead, despite the prevailing backdrop, we are optimistic about HKEX’s ability to capitalise on the long-term growth of China, the considerable opportunities to connect with the fast-growing capital hubs of Southeast Asia and the Middle East, and the continuing exciting developments in technology in our industry and beyond,” Chan, 54, said in the statement.
Chan, who took over from Nicolas Aguzin in March, faces a myriad of challenges as initial public offerings and trading has slumped along with the struggling Chinese economy. IPO proceeds in 2023 slumped to the lowest level in two decades and have seen a sluggish start to this year.
The exchange’s shares have tumbled almost 60% from early 2021, while the city’s benchmark index has slid for four straight years.
In a further setback to confidence, Hong Kong’s biggest debut in 2024, Chinese bubble-tea maker Sichuan Baicha Baidao Industrial Co., plunged 27% on Tuesday in its first day of trading.
Funds raised via IPOs fell 28% during the first three months this year. The listing pipeline “remained healthy” with 85 active application at March-end, HKEX said in the statement.
Still, shares rallied this week after China’s top regulator on Friday released a string of initiatives to help Hong Kong’s market, including supporting the listing of leading mainland companies in Hong Kong. It also pledged to expand the scope of exchange-traded funds, open up for real estate investment trusts and supporting the inclusion of yuan-denominated stocks in the Stock Connect trading link between the city and the mainland.
Strong Areas
The exchange saw a few strong areas in the quarter. Trading through the Northbound Stock Connect surged 37% to 133 billion yuan ($18.4 billion) a day as offshore investors poured money into mainland China. Trading through Northbound Bond Connect jumped 22%. Southbound flows into Hong Kong stocks slid 17% to HK$31 billion a day.
Derivatives trading was up 14% to an average of 855,000 contracts per day. Overall trading of equity products fell 22% to HK$89.1 billion a day.
Operating expenses rose 8% compared to a year earlier due to higher staff costs arising from an increase in headcount, payroll adjustments and “one-off retirement benefits payable to senior management,” HKEX said.
Chan was co-chief operating officer before her elevation to the top job, becoming then first woman to lead the exchange. She was previously partner at law firm Davis Polk & Wardwell LLP, serving clients including Tencent Holdings Ltd. The Harvard University-educated Chan also led the IPO Transactions Department in a previous stint at the bourse.
(Updates with more details throughout.)
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