China’s continuing regulatory assault on its tech, real estate and gaming firms won’t have a long-term impact on trading volumes and IPOs on Hong Kong’s trading floors.
That’s the view of the chief executive of the Hong Kong stock exchange, who shrugged off worries that Beijing’s crackdowns will affect initial public offerings and equities turnover in the Asian financial hub.
Crackdowns by mainland authorities on a range of industries in recent months have deterred some investors from stocks traded in, or through, Hong Kong.
“In terms of IPOs, the market has been affected by cautious sentiment from investors including concerns around regulatory developments in China,” said Nicolas Aguzin, CEO of Hong Kong Exchanges and Clearing (HKEX).
“But at the same time we have seen our pipeline [for main board listings] build to its highest ever level,” he said, in comments after the exchange’s third-quarter results. “I’m still optimistic about the outlook.”
The third quarter is typically strong for Hong Kong capital raisings, but the $6.8 billion raised over the period to the end of September represents the worst quarter since the pandemic-hit first quarter of 2020, and the worst third quarter since 2017.
The Hang Seng China Enterprise Index which tracks Hong Kong-listed Chinese shares, lost 18% in the third quarter, its worst period since 2015, while the benchmark Hang Seng Index this month touched its lowest level in a year.
This market volatility helped HKEX in the short term, as fees from trading and tariffs rose 10% in the quarter, but it nonetheless posted a fall of 3% in quarterly profit as fees were offset by a fall in investment income.
In the long run, Aguzin said, the demand to invest in China would stay strong. “The long-term potential of the market, I think, is still very strong,” he added.
“We will have to go through some bumps in the road as the country finalises all the different regulatory initiatives.”
- Reuters with additional editing by Sean O’Meara