HKEX's 2016 profit falls on fewer transaction

Hong Kong Exchanges and Clearing will expand cross-border trading links with China to include bonds, initial public offerings and commodities.
Hong Kong Exchanges and Clearing will expand cross-border trading links with China to include bonds, initial public offerings and commodities.PHOTO: REUTERS

37% decline in average daily trading weighs down earnings

HONG KONG • Hong Kong's stock exchange operator said yesterday its net profit last year fell 27 per cent due to a decline in fees generated by stocks and metals trading on the bourse, as it struggled to match stellar volumes seen during 2015's record rally.

Hong Kong Exchanges and Clearing (HKEX) reported a net profit of HK$5.8 billion (S$1.05 billion) for last year, according to Thomson Reuters data.

"The global financial markets were volatile and overshadowed by political and economic uncertainties. At home, there were concerns that China's economy was slowing down and that interest rates would rise.

"All this contributed to cautious sentiment among investors and created a challenging market environment for the group," HKEX said in a statement.

Average daily trading on the bourse last year fell 37 per cent to HK$70 billion compared with the previous year.

ROCKY ECONOMIC CLIMATE

The global financial markets were volatile and overshadowed by political and economic uncertainties. At home, there were concerns that China's economy was slowing down and that interest rates would rise. All this contributed to cautious sentiment among investors and created a challenging market environment for the group.

HONG KONG EXCHANGES AND CLEARING, in a statement.

Group profits were also dented by the bourse's London Metal Exchange subsidiary, which saw trading volumes fall 8 per cent year on year due to subdued metals demand causing commodities-related revenues to decline 10 per cent to HK$1.6 billion.

The results cap a busy period for HKEX, with the start of a second trading link between the city and China in December last year adding about 880 stocks for foreign investors to trade.

Among the next steps are expanding cross-border trading links to include bonds, initial public offerings and commodities, HKEX chief executive Charles Li said.

Mr Li has banked on deepening the bourse's ties with China to sustain profit growth despite fears over the Chinese economy, which is saddled with rising bad debt.

Last month, he outlined plans to renew his push for a third exchange this year, possibly aimed at institutional investors.

He also mentioned a review of the city's second exchange, the small-cap Growth Enterprise Market, which has been plagued by complaints of wild price swings in newly listed shares.

The daily value of shares changing hands on HKEX's main venue picked up this month to HK$82 billion, 25 per cent more than the average for the same period last year, according to data compiled by Bloomberg.

Stocks trading volumes struggled last year to match the records seen in 2015 when a dramatic rally in China drove frantic activity on the Hong Kong bourse.

The exchange cautioned that the operating environment for financial markets is expected to remain challenging and volatile this year due to "many political and economic uncertainties".

HKEX said it would continue to broaden its connectivity schemes with China.

The exchange's shares have risen around 8 per cent this year, compared with a 9 per cent year-to-date rally in the main Hang Seng benchmark.

REUTERS, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on February 28, 2017, with the headline 'HKEX's 2016 profit falls on fewer transaction'. Print Edition | Subscribe