Hong Kong Exchanges and Clearing said on Nov. 6 that third-quarter profit attributable to shareholders fell 1% from a year earlier to HK$4.86 billion, its first quarterly decline since early 2024, as trading on the city's stock market slowed from a record first half.

The result fell short of the HK$5.03 billion average analyst estimate, according to The Edge Malaysia. For investors in Asia, the exchange operator's earnings are a direct read on how much money is moving through Hong Kong. The quarter showed that the year's heavy flows from mainland investors and new listings have started to ease, even as the IPO pipeline stays long.

Revenue and other income rose 1% to HK$7.87 billion in the July to September quarter, the company said. China Daily Hong Kong reported that profit was 10% below the record second quarter and revenue 7% lower. Shares of HKEX closed down 2.28% at HK$385.6 on Friday, according to China Daily Hong Kong, on a day when the Hang Seng Index slid as part of a global sell-off.

Turnover and Stock Connect flows slow at HKEX

Headline average daily turnover fell 11% from a year earlier to HK$254.2 billion in the third quarter, HKEX said. Turnover in equity products dropped by the same proportion to HK$238.4 billion, and trading in derivative warrants, callable bull and bear contracts and warrants fell 15% to HK$15.8 billion a day.

The sharpest change came in Stock Connect. Southbound trading, in which mainland investors buy Hong Kong shares, fell 30% to HK$107.3 billion a day. Northbound flows into Shanghai and Shenzhen rose 15% to 309.7 billion yuan a day.

In its statement, the exchange tied the slower trading to more cautious sentiment, pointing to inflation concerns, uncertainty over U.S. interest rates and weaker momentum in artificial intelligence stocks. Chief Executive Bonnie Chan said global investors were rethinking how they allocate capital and called the period "a defining moment for Hong Kong's markets."

Costs also rose. Operating expenses increased 8% to HK$1.6 billion in the quarter, and the EBITDA margin narrowed two percentage points to 79%. Net investment income from corporate funds rose to HK$353 million from HK$254 million.

Other businesses held up better. Average daily volume on the Futures Exchange edged up 1% to 732,000 contracts, and chargeable volume at the London Metal Exchange rose 12% to 742,000 lots.

Record nine months, led by IPOs

The weaker quarter came after an exceptional first half. For the nine months to September, revenue and other income rose 12% to HK$24.57 billion and profit climbed 15% to HK$15.43 billion, both records for the period, HKEX said. Basic earnings per share rose to HK$12.20 from HK$10.62.

New listings were the standout. HKEX said 118 companies raised HK$388.4 billion through IPOs in the first nine months, more than double the HK$188.3 billion raised a year earlier, making Hong Kong the second-largest IPO market in the world by funds raised. Thirty-one listings raised HK$176 billion in the third quarter alone, up 123%. The largest was Zhongji InnoLight's HK$61.4 billion offering in July. Capital Times reported in October that this IPO haul put Hong Kong on course for its best year.

Follow-on fundraising reached a record HK$572.8 billion, up 25%, including an HK$80 billion primary placement by Alibaba in August that HKEX said was the largest in the city's history. Stock Connect revenue and other income for the nine months rose to a record HK$4.29 billion from HK$3.23 billion.

The Edge Malaysia, citing Bloomberg data, reported that more than 400 companies are waiting to list but that about a quarter of offerings planned this year have been abandoned. Aftermarket performance has also been uneven, with most recent Hong Kong IPOs trading below their offer prices.

Spending, the nickel claim and what comes next

HKEX spent HK$3.95 billion on capital projects in the first nine months, including HK$2.48 billion for its headquarters premises. The company did not propose a dividend for the quarter.

The exchange also disclosed that Elliott filed a claim on Sept. 3 at the UK Competition Appeal Tribunal against HKEX and the LME over the cancellation of nickel trades in 2022. HKEX said it considers the claim without merit and has made no provision.

Several market changes are close. HKEX said the second phase of its board lot framework and the launch of the uncertificated securities market are scheduled for Nov. 16. It is targeting a move to T+1 settlement in the second half of 2028, subject to readiness and regulatory approval. In August it launched five-year China government bond futures, which it described as the only exchange-traded contract of its kind listed offshore.

The next test is the fourth quarter's turnover figures, which HKEX will report with its full-year results. Its monthly market statistics for October and November will show earlier whether the slowdown in southbound flows has continued.