HKEx payout flat despite record profit
Chief says external risks urge prudence as dividend ratio remains at 90 per cent
Hong Kong Exchanges and Clearing disappointed the market yesterday by refusing to pay higher dividends despite a record net profit of $1.33 billion last year, up 26.7 per cent on the previous year's $1.05 billion.
The move shattered the hopes of brokers and investors banking on a special dividend - or at least an increase in its dividend payout from 90 per cent to 100 per cent - on the back of the strong performance.
The exchange announced a final dividend of 64 cents per share.
Adding to this the interim dividend of 49 cents, the payout ratio was maintained at 90 per cent of earnings per share at $1.26.
Market disappointment may have sparked a fall in its share price following the result announcement. The shares lost 4.08 per cent to close at $38.70. The stock had been up almost 40 per cent since the start of this year.
Chief executive Paul Chow Man-yiu said the board of directors had taken the decision not to pay a special dividend due to risk management concerns. As at the end of last year, the exchange had a shareholder fund of $4.36 billion, up 8 per cent from a year earlier.
'The exchange has to keep a higher reserve for a rainy day. We will review our reserve levels from time to time to see whether the level is appropriate. But at the moment, we have to keep at least $1.5 billion to back up the risks of the clearing houses, while we have to pay more than $680 million as the final dividend,' he said.
'As stock market turnover is getting higher, it is vital for us to have enough reserve to back up the risk levels of clearing and settlement.'
Chairman Charles Lee Yeh-kwong, in his last result announcement before stepping down next month, warned of uncertainty in the year ahead.
'We remain optimistic about the long-term prospects of our business and the market. However, uncertainties on the external front over global oil prices, interest rate and valuation of the renminbi could affect trading activity and hence our profitability,' he said.
'We also foresee intensified competition among exchanges in the region and beyond for investor funds and issuers' listings both in the cash and derivatives markets.'
Mr Chow said he believed even if China wanted more mainland enterprises to list on domestic exchanges in the form of A shares, it would not hurt Hong Kong.
'The A-share market is for the mainlanders while the Hong Kong market is more international. The two are not competitors but we are complementary,' he said.
The exchange's strong growth was driven mainly by record high turnover with trading fee income rising 16 per cent year on year to $793.24 million.
Total income affected by market turnover rose 11 per cent to $1.43 billion. This was also due to a 31 per cent increase in investment income, due mainly to a higher interest rate for its shareholder funds.
Also lifting profit were the many flotations which increased listing fee income 9 per cent to $413 million including a 19 per cent rise in new listing fees to $142.07 million.
The remainder was paid by existing listed firms, the number of which rose 4 per cent to 1,135.