(Bloomberg) -- Hong Kong’s stock exchange is expected to post its biggest quarterly loss in more than five years due to a prolonged slowdown in initial public offerings and plunging stock turnover.
Net income at Hong Kong Exchanges & Clearing Ltd. is set to fall 23% for the three months ended March to HK$2.94 billion ($375 million) from a year earlier, according to an average of six estimates compiled by Bloomberg. It will be the bourse’s fourth consecutive drop in quarterly profit, which marks the longest decline since late 2016.
The Asian financial hub’s exchange is pressured by weak stock market sentiment amid the city’s deadliest Covid outbreak and a sluggish primary-listing market as China tightened overseas listing rules. Some companies have decided to put off their potential billion-dollar IPO plans in Hong Kong, including Dalian Wanda Group’s mall unit citing market volatility, and electric car-maker Nio Inc. which is now considering a secondary listing in Singapore.
Read more: IPO Drought Places HKEX Among World’s Worst-Performing Bourses
Shares of HKEX have lost 29% so far, the worst start to the year in more than a decade. The amount raised through IPOs in the first quarter slumped about 90%, while the average trading value during the period fell 35% from a year earlier, according to data compiled by Bloomberg.
What Bloomberg Intelligence Says:
“HKEX may miss consensus expectations for profit to jump 21% in 2022, weighed down by the stock-market plunge and less IPO fundraising activity. Chinese issuers may be deterred by regulatory challenges and risk-off sentiment.”
--Sharnie Wong, brokers and exchanges analyst
HKEX has taken initiatives to stay competitive and boost profit. It has finally allowed blank check firms to go public under a strict framework, with the first special purpose acquisition company starting trading in March. The stock exchange is also looking to extend derivatives trading hours this year and open more representative offices around the world.
©2022 Bloomberg L.P.
Advertisement