HKEX Logs 30% Drop in Q3 Profit as Rising Rates, China Jitters Weigh

By Ambar Warrick

Investing.com-- Hong Kong Exchange Operator HKEX (HK:0388) said on Wednesday that its profit for the third quarter sank 30% as tightening monetary conditions and concerns over slowing Chinese economic growth kept most traders wary of big investments.

Profit attributable to shareholders for the quarter ended September 30 fell to HK$2.26 billion ($288 million) from HK$3.25 billion a year earlier. Total revenue fell 17% to HK$4.32 billion, the firm said in a press release.

While most quarterly metrics fell from record highs logged last year, a decline in trading volumes also reflected decreased investor appetite for risk-driven assets.

Average daily trading of equities sank 43% from last year to HK$84 billion in the September quarter, hurt largely by a lull in trading due to rising inflation and interest rates across the globe.

Exposure to the Chinese market, one of the biggest draws for trading in Hong Kong stocks, became less lucrative this year as a series of COVID-related lockdowns ground the Chinese economy to a halt.

A struggling property market also saw investors dump once-respected real estate stocks en masse this year.

Weakness in commodity markets also weighed. The London Metals Exchange, which HKEX owns, saw a 14% drop in the chargeable average daily value (ADV) of metal contracts traded. This coincided with a sharp drop in metal prices, as markets feared slowing economic growth will hit metal demand.

Still, derivatives markets remained a sole bright spot for the HKEX. ADV of derivatives contracts traded on the futures exchange grew 9% in the September quarter, the only sector of the company to log growth.

Hong Kong’s IPO market also saw some signs of thawing in the quarter, with offerings from several major firms including China Vanke spinoff Onewo Inc (HK:2602) and electric vehicle maker Zhejiang Leapmotor Technology Co Ltd (HK:9863) debuting last month. Total IPO volumes during the quarter were more than twice those seen in the first half of 2022.

Still, the HKEX has to contend with slowing demand for equities as global sentiment sours further. Shares of the exchange fell 0.5% on Wednesday, with broader Hong Kong stocks falling 1.2%.