Hong Kong bourse's 2023 profit lags forecast as new CEO preps for office

By Selena Li and Sumeet Chatterjee

HONG KONG (Reuters) -Full-year profit at Hong Kong Exchanges and Clearing Ltd, which runs the Hong Kong bourse, missed forecasts last year due to a drop in trading and listing activities, setting the incoming CEO a big task to boost its prospects.

China's economic slowdown, a sweeping regulatory tightening that hampered large companies' fundraising outside mainland China, and geopolitical tensions have all resulted in a bleak year for new listings in Hong Kong.

The city's economy expanded by just 3.2% in 2023, and capital flight turned the Hong Kong stock market into the worst-performing major index last year. India has now overtaken Hong Kong in terms of the value of listed shares.

Profit attributable to HKEX shareholders last year of HK$11.86 billion ($1.52 billion), while up 18%, lagged an average analyst forecast of HK$12.05 billion compiled by LSEG. Revenue during the year rose 3% to HK$18.94 billion.

Profit was mainly boosted by a HK$1.5 billion gain in net investment income from the exchange's corporate funds during the year, compared to a HK$48 million loss a year before, the statement said.

However the Hong Kong IPO market saw a slowdown in activity in 2023, with 73 company listings raising HK$46.3 billion, down 56% from 2022, it added.

The average daily turnover of equity products traded on the Hong Kong stock exchange, a key source of revenue, also posted a 14% year-on-year drop to HK$93.2 billion, it said.

Shares in HKEX ended down nearly 1% after the results on Thursday, while the broader market index fell 0.2%.

MARKET SENTIMENT

Noting high interest rates, a complex geopolitical environment and ballooning recent budget deficits, Hong Kong on Wednesday announced a mix of measures to lure back capital, businesses, and visitors to the city.

HKEX, which previously benefited from big Chinese companies raising capital in the city, has suffered since late 2020 from Beijing's crackdown on a broad range of industries, including technology and education, which hit investor confidence.

The 2023 results come as the Hong Kong exchange is set to see a change of guard with Bonnie Chan, who currently leads the bourse's listing division, set to take over as its new CEO from former JPMorgan banker Nicolas Aguzin in May.

Aguzin took the helm of one of the world's largest exchanges in mid-2021 when its share price was near a record, boosted by high trading volumes, mainly through the stock connect schemes, which link the Hong Kong bourse with mainland markets.

Its shares have fallen 47% since he joined the bourse.

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On Thursday Aguzin said market sentiment would continue to be affected by macro-economic and geopolitical issues, but the exchange was "cautiously optimistic" about its prospects.

"There were a lot of factors affecting our markets," he said at the post-result news conference, referring to the drop in the HKEX share price. "I believe that (Chan) has all the ingredients to become an incredible CEO at HKEX."