Following the succession of Chan Yiting as Chief Executive Officer, the Hong Kong Stock Exchange has undergone major personnel changes.
On April 24, the Hong Kong Stock Exchange announced that it had decided to appoint Tong Ka-shing to replace Laura Cha as Chairman of the Board. At present, the new board of directors of the Hong Kong Stock Exchange has been basically determined. As the HKSAR Government has been the single largest shareholder of HKEX, the appointment is subject to the written approval of the Chief Executive of the HKSAR.
For the new board of directors, the latest performance of the Hong Kong Stock Exchange is not optimistic. In the first quarter of 2024, the operating income and net profit of the Hong Kong Stock Exchange both fell year-on-year, and the situation of sluggish liquidity and cold IPO listing still existed. Some institutions believe that the recent positive phenomenon of liquidity in Hong Kong stocks has emerged, and this year, under the influence of many factors such as the change of management of the Hong Kong Stock Exchange and the gradual implementation of reform measures, Hong Kong stocks may usher in more imagination.
Mr Tong Ka-shing was appointed Chairman of the Board
The Board of Directors of the Hong Kong Stock Exchange is ushering in a moment of resignation and welcome the new.
According to the latest announcement of the Hong Kong Stock Exchange, Tang Jiacheng has replaced Laura Shi as chairman of the board of directors on the 23rd.
More than a month ago, the Hong Kong Stock Exchange welcomed its first female CEO, Chen Yiting, to replace Nicolas Aguzin, who left early. This also means that the Hong Kong Stock Exchange has ushered in the first time in more than 20 years since its listing was listed for the first time in two months, the chairman and the chief executive officer were replaced at the same time.
During Tang Jiacheng's tenure, he will partner with Chen Yiting, and the combination of the two has also been highly anticipated by the industry.
The 69-year-old Tong Ka-shing has extensive experience in the Hong Kong market, having served as Chairman of the Securities and Futures Commission of Hong Kong from 2012~2018.
During his tenure, the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect were launched in 2014 and 2016 respectively, and the Mutual Recognition of Funds (MRF) between the Mainland and Hong Kong was implemented in 2015. During Tong's tenure, new rules were also introduced for IPO regulation in Hong Kong's securities market, and the Hong Kong Securities and Futures Commission was given more powers to adopt "front-loading supervision".
He also has a deep connection with the Hong Kong Stock Exchange. According to public information, he served as a member and chairman of the listing committee of the Main Board and GEM of the Hong Kong Stock Exchange in 2002~2006 and 2006~2008.
In fact, the market had already expected Tang Ka-shing's appointment. Mr Tong and former Chief Executive of the Hong Kong Monetary Authority, Joseph Yam, were appointed as Independent Non-Executive Directors of HKEX in February 2023, when there were rumours that the next chairman of HKEX would be elected. On 29 August 2023, the Hong Kong SAR Government announced the establishment of a Task Force on Enhancing Liquidity in the Stock Market, and Mr Tong was appointed as the Chairman of the Task Force.
Currently, Mr. Tong also serves as Chairman of the Executive Committee of the Board and the Risk Management Committee (statutory), the Chairman of the Corporate Social Responsibility Committee, the Nomination and Governance Committee and the Remuneration Committee of HKEX. According to the regulations, Tong Ka-shing will receive a total of HK$4.55 million for 2024/2025 as a non-executive director for his role as the chairman of the board and the chairman of the above-mentioned board committee.
Laura Cha, the former chairman of the board of directors, retired as a director after the conclusion of the 2024 general meeting of shareholders of the Hong Kong Stock Exchange. The Board announces the appointment of Laura Cha as a Senior Advisor to the Board for the period from 25 April 2024 to 24 April 2025. In addition, Laura Cha will continue to serve as Chairman of HKEX's International Advisory Committee and China Advisory Committee.
Facing performance pressure
The situation faced by the new "team" of the Hong Kong Stock Exchange is not easy.
Recently, the first quarter report of the Hong Kong Stock Exchange has been released. Compared with last year, after the "blood transfusion" of investment income decreased, the revenue and net profit of the Hong Kong Stock Exchange showed signs of year-on-year decline.
In the first quarter of 2024, HKEX's revenue and other income was HK$5,201 million, down 6% from the first quarter of 2023. Profit attributable to shareholders was HK$2,970 million, down 13% year-on-year.
In the report, HKEX analyzed the reasons for the decline in performance, one is the decrease in trading and settlement fees due to the decline in average daily turnover. According to the data, in the first quarter of 2024, the average daily trading volume of equity securities on the Hong Kong Stock Exchange was HK$89.1 billion, a year-on-year decrease of 22.3%. Under the sluggish daily trading volume, the total revenue of trading fees, trading system usage fees, settlement and settlement fees of the Hong Kong Stock Exchange in the first quarter was HK$2.60 billion, down 5.8% year-on-year.
Second, the decrease in the number of newly listed derivative warrants and CBBCs has led to a decrease in the listing fee income of the Exchange. In the first quarter of 2024, HKEX had a total of 12 new listings, raising a total of HK$4.7 billion, the lowest since 2009. According to Deloitte's statistics, the global ranking of IPO funds raised by the Hong Kong Stock Exchange in the first quarter of this year has further slipped to 10th place from sixth place in the whole of last year. HKEX's listing fee income was only HK$370 million, accounting for 7.0% of revenue, down 12.7% year-on-year and 1.4% quarter-on-quarter.
In fact, the decline in daily trading volume and the contraction in the number of listed IPOs seem to have become the primary problems facing the Hong Kong Stock Exchange. In 2023, HKEX's revenue from traditional businesses such as trading system usage fees, clearing and settlement fees, and listing fees will only be HK$7.932 billion, down 11% year-on-year. However, benefiting from the increase in the interest rates of Hong Kong dollar and US dollar deposits, the net investment income of the margin and clearing house funds of the Hong Kong Stock Exchange hit a new high of HK$3.472 billion, which to a certain extent made up for the "blood loss" of the traditional business.
In the first quarter of this year, the investment income sector, which had supported revenue, also showed signs of shrinking. Net investment income decreased as a result of a decrease in margin size. According to the HKEX announcement, the average margin size of HKEX in the first quarter of this year decreased due to the lower margin requirements due to the decline in contract prices and the reduction in contributions to HKCC and LME Clear Clearing Participants. HKEX's net investment income decreased by HK$191 million from the first quarter of 2023.
In this case, the new leadership of the Hong Kong Stock Exchange will face greater pressure. Industry analysts believe that some of the previous reform measures have been gradually implemented, but from the current data, there has been no immediate effect. Therefore, on the basis of the existing reform measures, how the Hong Kong Stock Exchange will break the situation this year has also attracted much attention from the market.
Although the year-on-year performance declined, more positive signals are emerging. In March 2024, the average daily trading volume of Hong Kong stocks returned to above HK$100 billion after falling below HK$100 billion for six consecutive months. On April 19, the China Securities Regulatory Commission (CSRC) announced five capital market cooperation measures for Hong Kong, including the relaxation of the scope of eligible products for equity ETFs under Stock Connect, the inclusion of REITs in Stock Connect, and the inclusion of RMB stock trading counters in Hong Kong Stock Connect, which are expected to further improve the liquidity of Hong Kong's capital market.
"With the optimization of the listing conditions of the Hong Kong Stock Exchange in new economies such as the Internet and biotechnology, as well as the implementation of a series of favorable measures such as interconnection and the HKD-RMB dual counter model, the company's performance and investment sentiment are expected to rise simultaneously, and the diversified business model will also help the company smooth out performance fluctuations. Wang Yifeng, assistant director of Everbright Securities Research Institute and chief analyst of the financial industry, said in the research report that the company's 2024~2026 net profit forecast attributable to the parent company will be 128, 134, and 13.8 billion Hong Kong dollars.
(This article is from Yicai)