Hong Kong Stock Exchange Stares At 5th Straight Decline In Quarterly Profit: Could Alibaba's Primary Listing Be A Boon?

Hong Kong’s stock exchange is projected to post its fifth straight decline in quarterly profits as trading volumes slide and IPOs slow down, reported Bloomberg.

The Hong Kong Exchanges & Clearing Ltd. (HKEX) is expected to report a 9% decline in net profit to HK$2.52 billion ($322 million) in the second quarter, as per a survey of six analysts compiled by Bloomberg. Revenue is expected to fall 2% from a year earlier to HK$4.46 billion, it said.

Also Read: Alibaba Gains, EV Stocks Lose Shine: Hong Kong Traders Keenly Await Tencent Earnings

What Happened: HKEX has taken a hit due to declining markets and continuing tight COVID-19-related restrictions in the city at a time when more mainland Chinese firms are looking to list in rival hubs Shanghai and Shenzhen, the report said.

Goldman Sachs’ Projections: Goldman Sachs has projected the bourse’s average daily turnover will bottom out at HK$111 billion in the third quarter, then rise about 20% in the next year, the report said.

Benzinga’s Take: HKEX is now targeting a reboot as concerns over auditing rules is likely to bring a flurry of mainland Chinese firms to list or become more anchored in the Chinese territory, according to the report. This is crucial given that Alibaba Group Holdings Ltd. (NYSE:BABA) had announced earlier it would seek to add another primary listing in Hong Kong. China Life Insurance Co. (NYSE:LFC), and PetroChina Co. (NYSE:PTR) stated this month they would delist in New York.

If such U.S.-listed Chinese firms shift, it could be a boon to the city’s exchange, where IPOs are down over 90% and trading volumes fell 26% in the first half, according to data mentioned in the report.