We are the window that connects China and the world, says HKEX CEO

Excess savings from Chinese households could be growth opportunities and are likely to produce “active” financial results for Hong Kong Exchanges and Clearing, its chief executive told CNBC on Thursday.

“I think the second and third quarters should be active quarters in terms of China’s economic performance,” Hong Kong Exchange and Clearing CEO Nicolas Aguzin told CNBC Emily Tan.

He said he sees about $2.5 trillion in excess savings accumulated by Chinese households during Covid.

“All that consumption that didn’t have the opportunity … all of a sudden will be turned back into the market, creating great opportunities for growth,” Aguzin said.

The CEO’s comments will follow The exchange operator published the full-year results for 2022 which saw a nearly 20% drop in profits, with total profit attributable to shareholders at HK$10.08 billion (US$1.7 billion)

Meanwhile, HKEX hit a record high in the fourth quarter, with profit attributable to shareholders of HKEX 2.98 billion, up 11% from 2021.

In the HKEX earnings report, Aguzin said a “horizon of opportunity” lies ahead for the year.

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“We will continue to see the release of mainland domestic savings, the exponential growth of investment flows in and out of the mainland, and the acceleration of international participation in the mainland economy,” he said in the press release.

Shares in the HKEX gave up gains of more than 1% after the earnings announcement and closed unchanged on Thursday.

Challenging IPO environment

HKEX saw only 90 new listings in 2022. That’s compared to 182 IPOs in 2019 and 218 new listings in 2018, HKEX’s market statistics showed.

“Macroeconomic and geopolitical conditions led to weak sentiment and softness across the global IPO market,” the company said in its earnings release.

But Aguzin said in the statement that there were “signs of encouraging momentum in the IPO market” in the second half of the year.

Looking ahead to 2023, he told CNBC, “It should be a much more constructive year,” emphasizing that there is a “positive momentum that we have in China itself.”

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Bloomberg reported earlier Wednesday that Chinese authorities have asked state-owned companies to phase out the help of the “Big Four” US accounting firms.

When asked if there is an increased risk of companies being delisted, Aguzin replied: “I don’t know how the delistings will proceed, or if there will be. I mean it’s a negotiation going on and it will follow its own course,” he said. adding that he believes there is value in having “more international interaction”.

“We are the window that connects China and the world. And we are doing what we can to make sure there is more interaction, more connectivity.”

Opportunities in the Middle East

Asked about try to attract Saudi Aramcothe state-owned oil giant of Saudi Arabia, Aguzin said: “What I’m most excited about the Middle East is the opportunity that you have with the top 10 asset managers, sovereign wealth funds from there.”

“They have almost $3.8 trillion under management,” he added.

“We are always open to companies in the Middle East who can come if they want. It can be channeled in this part of the world,” he said.

CEO said HKEX’s signed memorandum of understanding with the Saudi Tadawul Group is still in its “early stage.”

“We’re also going to have some staff turnover, so many initiatives – and we’re at the beginning so we’ll see how that goes,” he said without elaborating.

“The key point is to make sure we have that connection. Those are two great markets – they have the same goals that we have. They want to connect, they want to make sure that the investors have opportunities, that their companies can grow, that they can work with this diversification.” he said.