Chinese-Owned Hong Kong Brokers Sink Into the Red Amid Offshore Bond Rout

Many Hong Kong-listed brokerages owned by Chinese mainland financial institutions sank into the red last year as they booked heavy losses from their own investments that included significant holdings of Chinese property developers’ offshore dollar bonds.

Six securities firms traded on the city’s exchange reported losses in 2022, ranging from HK$241 million ($30.7 million) at Southwest Securities International Securities Ltd. to a whopping HK$6.5 billion at Haitong International Securities Group Ltd., their annual reports show. Guotai Junan International Holdings Ltd. managed to stay in the black, although its net profit attributable to shareholders plummeted 93% to HK$80.4 million.

The seven brokerages were hit by weak IPO business in Hong Kong and poor sentiment in capital markets in 2022, which resulted in a drop in commission and fee income. But the plunge in profit was partly due to losses from investing their own capital to buy and sell financial instruments, a business known as proprietary trading.