Hong Kong stock exchange operator HKEX posts record US$1.6 billion profit for 2021 as daily turnover soars

  • The growth came mainly from higher trading and clearing fees on the back of a 29 per cent increase in average daily turnover
  • Financial Secretary’s proposed listing reform to allow large pre-profit and pre-revenue start-ups to list may help improve poor IPO market

Hong Kong Exchanges and Clearing (HKEX), which runs the third largest stock market in Asia, posted record annual profit for a fourth consecutive year as turnover soared.

The exchange operator posted a 9 per cent increase in net profit to HK$12.54 billion (US$1.6 billion) for 2021, or HK$9.91 per share, according to a stock exchange filing on Thursday.

The profit was lower than the consensus forecast of a 14 per cent increase to HK$13.14 billion, according to analysts polled by Bloomberg.

“HKEX had a strong year in 2021, despite a turbulent macro backdrop and the ongoing pandemic. Revenue and profit both reached record highs,” said Nicolas Aguzin, chief executive of HKEX after the results were released at noon. He will host a media briefing this afternoon.

He said the exchange has benefited from strong market turnover, which offset low investment income.

“I am confident that HKEX is well positioned as a super-connector to play an increasingly important role in the fast-evolving global capital markets of the future,” he added.

The exchange’s revenue hit a record HK$20 billion last year, 10 per cent higher than in 2020. The growth stemmed mainly from higher trading and clearing fees income on the back of a 29 per cent increase in average daily turnover to HK$166.7 billion.

Daily turnover via the northbound channel of the stock connect scheme – international investors trading Shanghai and Shenzhen shares via HKEX – rose by almost a third year on year to 120.1 billion yuan (US$19 billion). The southbound average daily trading turnover – mainlanders trading Hong Kong shares through the stock connect scheme – rose 71 per cent last year to HK$41.7 billion.

The rise in trading and clearing fees offset a decline in new listings business. Hong Kong saw 98 new listings last year that raised a total of HK$331.4 billion, 17 per cent lower than 2020 and the first decline since 2017.

The city has been the largest IPO market worldwide in seven out of the past 13 years. However, since Beijing started undertaking a range of regulatory reforms in July to crackdown on technology companies and private tutoring businesses, new listings have slowed down, particularly in the fourth quarter of 2021.

There has been no improvement this year.

Just six IPOs had been completed as of February 18, raising a combined US$1.1 billion, an 87 per cent plunge from the US$8.6 billion raised from 20 IPOs in the same period a year ago, data from Refinitiv shows.

A new government proposal may help trigger a bounce back. Financial Secretary Paul Chan Mo-po said the HKEX and the Securities and Futures Commission have been reviewing more listing reforms to help pre-profit or pre-revenue start-ups raise funds in the city.

HKEX’s share price dropped 4 per cent to a one-year low of HK$399.6 at noon, before the results were announced.

Author: Enoch Yiu, SCMP

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