Advertisement
Advertisement
Charles Li says HKEx will continue to work with the Shenzhen Stock Exchange to allow brokers to test cross-border trading. Photo: Nora Tam

New | Hong Kong Exchanges profit surges, but falls short of market expectations

Company boss says mainland Chinese uncertainties may delay some major projects in the near term as HKEx posts HK$4 billion first-half gain

Mainland Chinese market uncertainty may lead to a delay in major projects, said the head of the Hong Kong stock exchange, even as he refrained from specifying if the proposed stocks through-train scheme between Hong Kong and Shenzhen would be affected.

"Mainland [Chinese] market uncertainties may delay some major projects in the near term," said Hong Kong Exchanges and Clearing chief executive Charles Li Xiaojia at a results briefing on Wednesday, without elaborating.

When asked if that could include the Shenzhen-Hong Kong Stock Connect scheme, which was widely expected to be launched by the end of this year, Li said: "The HKEx will continue to work with the Shenzhen Stock Exchange to allow brokers of both markets to conduct testing for cross-border trading in the coming weeks. Our preparation work continues and we have to wait for Beijing to give the approval."

Li said strong market turnover from a searing rally in Hong Kong and mainland Chinese equity markets in the second quarter boosted the first-half profit of HKEx by 73 per cent to HK$4.1 billion. It, however, fell short of market expectations of a profit increase of 76 per cent to 82 per cent.

The second-quarter net profit was up 112 per cent year on year to HK$25.2 billion, also lagging behind brokers' estimates of a 120 per cent to 124 per cent jump.

HKEx chairman Chow Chung-kong warned of challenges ahead. "With multiple and complex challenges facing the world economy, the performance of the global financial markets is subject to uncertainties in the second half of the year," he said.

Revenue surged 48 per cent to HK$6.85 billion as average daily turnover doubled in the first half to HK$125.3 billion, with fee income climbing 80 per cent to HK$1.32 billion.

HKEx declared an interim dividend of HK$3.08 per share, up 68 per cent from a year ago.

In April, the exchange recorded an average daily turnover of HK$200 billion - triple its previous normal level - in the midst of a market rally that started after mainland Chinese funds were allowed to invest in Hong Kong stocks, taking shares to their highest levels in seven years.

The market began to face a downturn in the middle of June when Beijing tightened margin financing for stock trading, sparking a selling spree that erased nearly US$4 trillion in value from markets in Shanghai and Shenzhen. The sell-off also affected Hong Kong.

HKEx's profit growth also came from a 37 per cent increase in commodities revenue of HK$886 million in the first half, contributed mainly by subsidiary London Metal Exchange, which raised its trading fees from January 1.

This offset a drop in trading volume at LME by 3 per cent year on year during the six-month period due to weaker demand for industrial metals. Listing fee income rose 4.25 per cent to HK$564 million.

Operating expenses were up 11 per cent at HK$1.58 billion, primarily reflecting increased staff costs.

Analysts expect challenges ahead as turnover has fallen sharply in recent weeks to below HK$100 billion - down 25 per cent from the first half.

Credit Suisse analyst Arjan van Veen said he believed there was substantial downside risk to HKEx because of concerns over its turnover.

HKEx closed down 4.17 per cent at HK$207 on Wednesday.

This article appeared in the South China Morning Post print edition as: HKE x profit surges, but lags expectations
Post