Net income is the second highest in history! HKEX's revenue in the first half of the year increased by 18% year-on-year, with 33 newly listed companies

On August 16, the Hong Kong Stock Exchange announced its results for the first half of this year. Both its revenue and net profit were the second-highest on record, second only to the record in the first half of 2021. However, the market volume was affected by the poor investment sentiment in the global market, and the performance was relatively weak.

In the first half of the year, HKEX revenue and other income was HK$10,575 million, up 18% year-on-year from the first half of 2022, of which major business income was HK$9,729 million, up 5% year-on-year; Net investment income was HK$817 million, a net loss of HK$378 million compared with the same period last year, turning a loss into a profit year-on-year. Profit attributable to shareholders was HK$6,312 million, up 31% from the first half of 2022.

In terms of IPOs, a total of 33 new listings on the Hong Kong Stock Exchange in the first half of 2023, an increase from 27 in the same period last year, raised a total of HK$17.9 billion, down 9% from the first half of 2022. The IPO market gained momentum in the second quarter of 2023, with IPOs raising HK$11.2 billion, up 133% year-on-year and 67% month-on-month. During the period, a steady stream of listing applications continued, with a total of 104 listing applications pending as at 30 June 2023.

HKEX pointed out that in the first half of this year, Hong Kong's spot market volume and IPO activity continued to be affected by the fragile global market sentiment. While the average daily turnover of the Hong Kong securities market decreased by 16% year-on-year to HK$115.5 billion, the ETF market continued to perform strongly, with an average daily turnover of HK$11.7 billion, up 21% year-on-year.

In the first half of this year, the Stock Connect performed well, with an average daily turnover of RMB109.3 billion and HK$33.8 billion in northbound and southbound transactions respectively. Revenue and other income from Shanghai-Shenzhen-Hong Kong Stock Connect amounted to HK$1,152 million (H1 2022: HK$1,185 million), of which HK$846 million (H1 2022: HK$879 million) came from trading and settlement activities.

On 13 March, Shanghai-Shenzhen-Hong Kong Stock Connect officially expanded the scope of stock targets, with four major international companies listed in Hong Kong included in Hong Kong Stock Connect, and 1,034 additional stocks added to Shanghai Stock Connect and Shenzhen Stock Connect, driving the average daily trading value of Shanghai Stock Connect and Shenzhen Stock Connect to RMB122.5 billion in the second quarter of 2023, an increase of 26% over the first quarter of 2023. Hong Kong Stock Connect joins major international companies listed in Hong Kong, further consolidating Hong Kong's position as a global listing and trading venue; The expansion of eligible stocks under the Stock Connect also marks another important milestone in the Stock Connect scheme.

On 19 June, HKEX launched the "HKD-RMB dual counter model" and the dual counter market maker mechanism. As at the end of the Period, a total of 24 Hong Kong listed companies (accounting for 40% of the average daily turnover in the spot market) traded in dual-counter securities, and nine SEHK Participants joined the two-counter market maker mechanism as market makers.

HKEX pointed out that the launch of the dual-counter model provides investors with a more diversified range of Hong Kong RMB-denominated products, and also provides listed companies with a channel to access Hong Kong's offshore RMB capital pool, further enhancing Hong Kong's status as the world's premier offshore RMB hub. Following the launch of the dual counter model, HKEX is now working with regulators and Mainland counterparts to explore the details of the next phase of allowing Chinese mainland investors to conduct RMB over-the-counter trading through Hong Kong Stock Connect.

In the first half of this year, the average daily turnover of Bond Connect Northbound reached a half-year high of RMB38.9 billion, up 25% year-on-year. The average daily turnover reached a new monthly high of RMB46.3 billion in May 2023, and a record high of RMB81.6 billion on May 10, 2023. As at 30 June 2023, there were 802 registered investors (physical tier) participating in Northbound Bond Connect, covering more than 30 jurisdictions.

In addition, a total of 97 bonds were listed on the Stock Exchange in the first half of 2023, raising over HK$294 billion. The number of listed bonds reached 1,663 on 30 June this year, with a total outstanding amount of over HK$5.6 trillion. HKEX's Sustainable and Green Exchange (STAGE) continues to list a growing number of products. On June 30, 2023, STAGE contained information on a total of 136 sustainability-focused products from leading issuers.

In addition, since the launch of Core Climate in Hong Kong's international carbon market in October 2022, HKEX has been committed to strengthening its infrastructure and expanding its product range. As of June 30 of that year, Core Climate had grown to more than 60 participants, three times as many as when it was first launched.

It is worth noting that the latest "Swap Connect" launched on 15 May this year is a mechanism for connecting the interest rate swap markets between Hong Kong and Chinese mainland banks, with the initial opening of northbound trading, allowing Hong Kong and international investors to participate in the mainland inter-bank financial derivatives market. On the first day of launch, a total of 27 offshore investors traded onshore RMB interest rate swap products with a notional amount of more than RMB8.2 billion.

OTC clearing companies' total settlement volume in the first half of 2023 increased to US$167.9 billion in nominal terms, up 60% from the first half of 2022, reflecting an increase in single-currency interest rate swap settlement volumes following the launch of the Swap Connect. In addition, cross-currency swap settlement reached a half-year high of $75.1 billion, up 25% from the previous half-year record of $60 billion in the first half of 2022.

Hong Kong Stock Exchange Chief Executive Au Guansheng pointed out at the interim results conference that the global IPO market was weak in the first half of the year, but with the decline in inflation, slowing interest rates and more mainland policy support, all these factors combined should bring better IPO market prospects, many companies are still very willing to list in Hong Kong, but it is difficult to predict when the market will reverse the momentum and show strong growth.

In addition, in terms of stamp duty, Ou Guansheng pointed out that the previous increase in stock stamp duty increased the tax revenue of the Hong Kong SAR government, which is a measure to increase revenue during the epidemic prevention and control period. Whether the stamp duty on shares will be reduced in the future depends on the HKSAR Government.