HONG KONG :Hong Kong’s financial exchange is set to benefit from a revival in listings following China’s reopening and clearer offshore listing rules, its chief executive said on Thursday, while warning economic challenges are expected to persist in 2023.
Hong Kong Exchanges and Clearing Ltd 0388.HK (HKEX) reported earlier in the day that 2022 profits slumped 20 per cent as geopolitical tensions curbed trading and listing activity, but the drop was not as bad as markets had feared.
“Looking ahead, we expect many more macro challenges to persist,” HKEX Chief Executive Officer Nicolas Aguzin told a news briefing.
Last year, China’s sharp COVID-induced economic slowdown, sweeping regulatory moves that hampered large enterprises’ fundraising outside mainland China, and geopolitical tensions all resulted in a bleak year for new listings in Hong Kong.
“However, I want to stress that we do not think that the medium to longer term opportunities are diminished. We think they are significant,” Aguzin said.
China’s decision to dismantle its COVID-19 curbs in December
and the continued relevance and importance of Asia to the global economy provided the exchange operator with “renewed optimism”, he said.
“Market sentiment began to improve in the fourth quarter, resulting in a strong end to the year for HKEX,” HKEX Chair Laura Cha said in a news release.
In December alone there were 21 new listings, accounting for about a quarter of total listings on the bourse in the year.
Another boost to listings may come from better regulatory certainty from China.
China last Friday published a set of final rules to regulate offshore listings, effective from March, which is set to revive offshore initial public offerings (IPOs) by Chinese firms after a regulatory freeze imposed in July 2021.
China said it will allow eligible issuers to adopt a variable interest entity (VIE) structure, which helps eleviate the concerns that such a popular route would be banned. VIEs are overseas holding companies.
“There were a lot of uncertainties among the VIEs and offshore listing rules has helped a bit of create consistency all around,” Aguzin added.
Only around $12.7 billion was raised last year via IPOs and secondary listings in Hong Kong, a 70 per cent drop from 2021, according to Refinitiv data.
HKEX’s share price ended up 0.06 per cent to HK$327.6 on Thursday. It had gained about 15 per cent in the last three months, buoyed by CHina reopening hopes, but fell over 11 per cent in the past month.
($1 = 7.8439 Hong Kong dollars)