Hong Kong Exchange Posts Record Profit on Trading, IPO Surge

Hong Kong Exchanges & Clearing Ltd. delivered record earnings in the first quarter, driven by a boom in trading and initial public offerings.

Net income rose 70% to HK$3.84 billion ($495 million) on the back of a 35% increase in core revenue. Investment income swung to a HK$418 million profit from a loss a year earlier.

The report marks the last earnings period before former JPMorgan Chase & Co. executive Nicolas Aguzin takes the helm at the bourse. He has replaced long-serving Chief Executive Officer Charles Li, who left at the end of last year.

“HKEX has had a strong start to 2021, reporting record quarterly revenue and other income, and profit,” said Interim CEO Calvin Tai. “This was driven by a buoyant IPO market and very robust trading volumes, with headline ADT and Stock Connect having their best quarter ever.”

The exchange benefited from its link with Chinese mainland bourses, a program that Li helped launch in 2014. Known as Stock Connect, daily turnover from mainland traders nearly tripled during the period. Equities trading on the whole surged 91%, while funds raised in initial public offerings jumped ninefold.

Hurdles Could Test HKEX Despite Robust IPOs: Company Outlook

Trading was boosted by an influx of big name Chinese companies such as streaming platform Bilibili Inc. and search giant Baidu Inc. selling shares on the bourse. Mainland firms have been seeking listings in the financial hub amid deteriorating relations with the U.S. and the threat of New York delistings.

The momentum has slowed since the first quarter. Average daily stock turnover slid about 27% in April, while southbound Stock Connect activity dropped as much as 48% from the first quarter, according to Sharnie Wong, a senior analyst at Bloomberg Intelligence.

©2021 Bloomberg L.P.

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