Hong Kong exchange sees challenging year ahead

Aug 13, 2018
This despite record numbers for first half of year and for number of IPOs in the pipeline

The Hong Kong stock exchange (HKEX) sees a challenging six months ahead despite reporting record revenues in the first half of the year.

The HKEX saw revenues rise 32 percent to HK$8.19 bn ($1.04 bn) for the six months up until the end of June, while profits jumped 44 percent to HK$5.04 bn.

A 67 percent increase in daily trading turnover compared with a year ago has also led to more trading and clearing fees.

With China Tower’s HK$54.3 bn ($6.9 bn) IPO last week – the world’s largest in two years – funds raised on the HKEX have already surpassed last year’s total, putting the bourse ahead of international rivals.

But, Charles Li Xiaojia CEO at the HKEX, warned in a statement at a press conference last week announcing the numbers that ‘the second half will be more challenging,’ with, he says, the market ‘lacking direction’.

The escalating US-China trade war has ‘shifted the wind’, Li notes, and he expects the weak market sentiment to continue for the rest of 2018.

But he also highlights a strong pipeline of IPOs from ‘new economy’ companies, driven strongly by an overhaul of the exchange's listing rules.

In April, the Hong Kong exchange moved to allow listings by companies with a dual-class share structure, which gives greater voting rights to certain shareholders. The exchange also began to accept listings of biotech companies that have yet to turn a profit.

Li reveals that the exchange has received 10 IPO applications from these two sectors, besides the three that have already gone public, and that he expects ‘a few dozen’ companies in general to list by the end of the year. 

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