In the past two years, the performance of the Hong Kong stock market has been sluggish, and the once highly regarded Hong Kong Stock Exchange (00388. HK) has also been somewhat affected.
On the afternoon of April 24, the Hong Kong Stock Exchange released the first quarter report of 2024, during which there were both worries and joys.
However, from the perspective of stock price performance, the Hong Kong Stock Exchange has continued to rise in volume recently, with an increase of 3.55% on April 24, which is a good performance.
How did the first quarter perform?
According to the financial report, in the first quarter, the revenue and other income of the Hong Kong Stock Exchange was HK $5.20 billion, down 6% year-on-year but up 7% quarter-on-quarter, and the net profit attributable to the parent company was HK $2.97 billion, down 13% year-on-year but up 14% quarter-on-quarter.
HKEX noted that the first quarter of 2023 was a quarter benefiting from a strong recovery in economic activity after the pandemic. This means that the first quarter of 2023 will have a high base, so the year-on-year growth performance in the first quarter of 2024 is understandable.
Broken down, revenue from major businesses decreased by 7% year-on-year to HK$4.66 billion, mainly due to lower trading and settlement fees due to lower average daily turnover, lower net investment income from margin and clearing house funds, and lower listing fee income. However, some of the declines were offset by an average increase of 13% in trading and settlement fees from 1 January 2024 onwards by the LME and LME Clear, as well as an increase in the volume of the business.
See the figure below for details.
Net investment income from the Company's funds was HK$540 million, down 3% year-on-year, driven by a decrease in net fair value income from externally managed investment funds (external portfolios).
From the perspective of business segments, the revenue and other income of the cash segment was HK$1.88 billion, a year-on-year decrease of nearly 12%, mainly due to the decrease in the average daily turnover of equity securities products.
Revenue and other income from the Equity Securities and Financial Derivatives segment decreased by 15% year-on-year to HK$1.57 billion, mainly due to a decrease in net investment income due to a decrease in margin size.
Revenue and other income from the commodities segment was HK$670 million, representing a year-on-year increase of 33%.
What is the future of the Hong Kong Stock Exchange?
HKEX Group Chief Executive Chan Yiting also said in the quarterly report that despite the weak global macro environment, the group's derivatives and commodities business still performed strongly, and the trading volume of derivatives hit a new quarterly high. While the equity market has weakened due to macro market sentiment, the average daily turnover in March and April 2024 has rebounded significantly, indicating a recovery in investor confidence. The trading volume of Stock Connect continued to rise, with significant increases in trading volume of Shanghai-Hong Kong Stock Connect, Shenzhen-Hong Kong Stock Connect and Bond Connect, with Bond Connect reaching a new quarterly high.
It is worth noting that in addition to the recovery of average daily turnover, some technology stocks in the Hong Kong stock market have also risen recently, which has attracted widespread attention.
For example, in the last 3 trading days, Tencent Holdings (00700. HK) rose by 13.3%, Meituan-W (03690.HK) also rose by 19.2%, and Kuaishou-W (01024.HK) also rose by 19.73%.
In addition, judging from the year-to-date performance, the stock prices of companies such as Tencent, Meituan, and Trip.com Group-S (09961.HK) have also risen.
The gradual recovery of these star stocks in the Hong Kong stock market is a key signal that the rise has led to the recovery of the Hong Kong stock market.
According to the analysis, there may be three reasons for the recent surge in Hong Kong stocks: 1) policy support, including the CSRC saying that it will deepen cooperation with Hong Kong, etc.; 2) the spillover of A-share high dividends, which is reflected in the continuous inflow of southbound funds, and most of the purchases are in the direction of high dividends; 3) The fundamental resilience of the Internet industry is actually significantly underestimated by the market.
Recently, some institutions have expressed optimism about the Hong Kong stock market.
UBS issued a report saying that it upgraded Chinese mainland and Hong Kong stocks to overweight, citing strong earnings despite concerns about China's real estate and macro conditions, saying that the consumer and internet sectors are highly weighted among the components of the MSCI China Index, and that the performance is expected to perform better as consumption shows initial signs of recovery.
Everbright Securities also recently released a research report saying that, on the whole, the buyer institutions are still optimistic and positive about the follow-up trend of Hong Kong stocks, and believe that they are optimistic about the trend of Hong Kong stocks in the second quarter under the background of the continuous recovery of the domestic economy, the expectation of overseas interest rate cuts, and the current valuation and cost performance.
The most direct beneficiary of the overall recovery of the Hong Kong stock market will be the Hong Kong Stock Exchange, and its subsequent performance is worth continuing to track.
Author: Yun Zhifeng Qi