Hong Kong's stock exchange operator expects uncertainties over China's growth and a global economic slowdown to drag on trading volumes, although the outlook for listings is improving.
Hong Kong Exchanges and Clearing Ltd., commonly known as HKEX, reported average daily turnover fell 20% year over year to 90.8 billion Hong Kong dollars in the April–June quarter. Average daily turnover, which measures trading volumes, dropped 16.5% in the first six months of 2023.
Uncertainties such as inflationary pressures, fragile geopolitics, a slower-than-expected economic recovery in mainland China, and fears over global recession are affecting market sentiment, HKEX said. However, there was some positive news at the macro level, including expectations that global interest rates are nearing a peak, that China and the US have reestablished communications and that some stimulus programs are anticipated to boost mainland China's economy, HKEX said.
Slowing economic growth and stresses in the US and European banking sectors have taken a toll on investment sentiment around the globe. IPO activity has remained subdued globally in 2023. A total of 661 IPOs raised a combined $60.84 billion in the first half, compared with $98.88 billion raised via 867 IPOs in the year-ago period, according to S&P Global Market Intelligence data.
Strong IPO pipeline
HKEX expects to host more initial public offerings with a strong pipeline of 104 active applications as of June 30.
"Whilst the macro landscape will continue to shape market sentiment, we are pleased to see encouraging signs of a revival in our IPO market, matched by a very healthy pipeline," CEO Nicolas Aguzin said in the company's statement.
While the number of IPOs rose to 33 from 27 in the first six months of 2023, the aggregate amount raised was down 9% year over year, HKEX said.
Second-quarter net profit rose 34% year over year to HK$2.90 billion, mainly due to a net investment income gain of HK$268 million, compared with a HK$274 million loss in the same quarter of 2022. Net profit in the first half of 2023 rose 31% year over year to HK$6.31 billion.
The operator said it will continue to expand its regional and global connectivity and enhance its product portfolio to further support capital markets in Hong Kong and mainland China and to consolidate its role as an international financial center.
In May, HKEX rolled out Swap Connect, a new mutual access program between Hong Kong and mainland China's interbank interest rate swap markets, as the world's first derivatives mutual market access program. A month later, it launched the HKD-RMB Dual Counter Model and the Dual Counter Market Making Program in its securities market, a move that will further support the ongoing internationalization of the yuan.
As of Aug. 15, US$1 was equivalent to 7.82 Hong Kong dollars.
