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HONG KONG: Hong Kong’s stock exchange operator posted HK$12.5 billion (US$1.6 billion) for 2021 but also registered its worst quarterly earnings in two years as China’s crackdown on a host of business sectors hit trading and company debuts.

The Hong Kong Exchanges and Clearing (HKEX) said its 2021 profits rose by nine percent from the year before, thanks to a record first quarter. “HKEX had a strong year in 2021, despite a turbulent macro backdrop and the ongoing pandemic,” said the bourse’s chief executive Nicolas Aguzin.

Aguzin said HKEX also broke records in cash market turnover and in its “stock connect” and “bond connect” programmes, which allow international investors to access Shenzhen and Shanghai markets. Buoyed by listings of major Chinese companies, Hong Kong’s stock exchange started strong in 2021 but later underperformed, with profits dropping in the three subsequent quarters.

HKEX saw a net income of $HK2.67 billion in the last three months of 2021, representing an 8.6 percent drop year-on-year. China’s regulatory crackdown on the property and technology sectors last year roiled markets, wiping billions from company values and preventing a number of major corporations from listing in the finance hub.

Bloomberg News says Hong Kong is no longer in the global top three destinations for IPOs. Hong Kong is also currently in the throes of its worst coronavirus outbreak, deepening the city’s economic woes and international isolation. This year HKEX will be affected by “uncertainty surrounding the pandemic recovery, ongoing geopolitical risks, restrictions on travel and upcoming interest rate hikes”, bourse chair Laura Cha said in a statement.

In its Thursday annual report, HKEX also reported a 10 percent increase in core business revenue last year, driven by high trading and clearing fees. Average daily turnover of cash equities rose by 32 percent in 2021. In October, Hong Kong’s stock exchange made it easier for international investors to bet on mainland China’s futures market, something which used to be monopolised by Singapore.

HKEX also announced in December that it would allow the listing of special purpose acquisition companies (SPAC), a popular investment vehicle, months after Singapore announced the same.

Hong Kong Financial Secretary Paul Chan said in his Wednesday budget speech that the city’s stock exchange and the Securities and Futures Commission are reviewing listing reforms.

The proposed measure is intended to help “large-scale advanced technology enterprises” which require substantial capital for research and development, but are not qualified for listing under current rules, Chan said.

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