Hong Kong Exchanges and Clearing's (0388) interim profit plunged 27 percent from a year ago, more than estimated, amid investment losses, slower trading and fewer initial public offerings.

The bourse operator posted a net profit of HK$4.84 billion in the first half, missing market estimates which had expected the profit to reach between HK$4.95 billion and HK$5.35 billion.

It declared an interim dividend of HK$3.45, down 26 percent from a year ago.

Revenue and other income fell 18 percent to HK$8.94 billion over the same period, with core business revenue down 11 percent.

The exchange has been hurt by sliding markets and strict Covid restrictions that have prevented bankers from traveling, while more mainland firms have been seeking to list on rival bourses in Shanghai and Shenzhen.

In the first half, funds raised from new IPOs in the city tumbled 91 percent while average daily turnover in the local stock market fell 27 percent to HK$138.3 billion.

The bourse lost HK$378 million in the first six months on its investments, compared with a profit of HK$428 million from the previous year.

HKEX said it will redeem HK$2 billion from the external portfolio in the second half. The redemption will be invested internally in the corporate fund, which is placed in cash and bank deposits, equities and debt.

Reducing the external portfolio will lower fluctuations in earnings, the exchange said, citing significant market volatility, rising interest rates and global economic pressures.

Shares of HKEX closed 1.56 percent lower yesterday, bringing this year's decline to 25 percent.

However, the exchange said the IPO pipeline is strong and it may now see a reboot as tension over auditing rules could bring a bevy of mainland Chinese firms to list or become more anchored in the city.

Alibaba (9988) announced in July it would seek to add another primary listing in Hong Kong.

In a report this month, Goldman Sachs predicted that the bourse's average daily turnover will bottom out at HK$111 billion in the third quarter, then jump about 20 percent in the next year.

Future momentum is hinged on further IPO reforms, targeting companies in the deep-tech space, and a review of its small-cap platform GEM.

Chief executive Nicolas Aguzin said yesterday HKEX will continue to diversify its revenue sources and will not change its strategy due to short-term market conditions.

Nicolas Aguzin said the bourse won’t change its strategy due to short-term market conditions.

HKEX profit tumbles 27pc to $4.8b amid slowdown