Hong Kong’s stock-exchange operator reported record annual profit for 2021, boosted by a flurry of Chinese listings, and despite a steep drop-off in share sales and stock trading in the second half of the year.
Hong Kong Exchanges and Clearing Ltd. has been a major beneficiary of Hong Kong’s deepening financial ties with China, as well as the decoupling of Chinese companies from U.S. markets, and is one of the world’s most valuable publicly traded exchange firms.
The company on Thursday reported a profit of 12.54 billion Hong Kong dollars, equivalent to $1.6 billion, up 8.8% from the prior year but slightly lower than analysts polled by FactSet had expected. Revenue and other income rose 9.2% to a record HK$20.95 billion, equivalent to $2.7 billion.
Initial public offerings in Hong Kong raised the equivalent of $42.5 billion last year, but nearly two-thirds of that came in the first half, before a selloff in stocks of Chinese tech companies intensified. The figure includes so-called homecoming listings by eight Chinese companies already listed in the U.S., such as the technology companies Trip.com Group Ltd. and Baidu Inc.
“Despite some softness in the second half reflecting the macro environment," Chairman Laura Cha said, “the IPO pipeline remains very good as we move into 2022."
Tightening regulatory scrutiny in both the U.S. and China has made it harder for Chinese companies to go public in America, and the Hong Kong exchange said in August it had seen a jump in listing inquiries. In the U.S., securities regulators have started a countdown that will force many Chinese companies to leave American stock exchanges, potentially spurring more to sell shares in Hong Kong.
The Hong Kong exchange has also begun to allow listings by special-purpose acquisition companies, creating another source of business.
Still, China’s long-running crackdown on homegrown internet companies such as Alibaba Group Holding Ltd. has depressed trading volumes and stock prices, potentially making large IPOs more difficult. Average daily trading volume in January was down by nearly half from a year earlier, at the equivalent of $16.5 billion.
Hong Kong was among the worst-performing major markets last year, with drags that included China’s official pressure on sectors such as e-commerce, videogames, property, gambling and after-school tutoring.
The full-year results were the first under Chief Executive Nicolas Aguzin, a JPMorgan Chase & Co. veteran who took the job last year.
Mr. Aguzin said the company has “sizable opportunities" in areas such as sustainability, the new economy and selling a broader range of products, despite challenges posed by geopolitical tensions and the Omicron variant of Covid-19.
HKEX shares fell 5.4% Thursday to HK$394.60 a share, equivalent to $50.56, underperforming the benchmark Hang Seng Index, which fell 3.2% as Russia’s attack on Ukraine rattled global markets.
This story has been published from a wire agency feed without modifications to the text
