HKEx 2015 profit up 54 per cent thanks to higher turnover, property sale and IPO boom
Stock exchange operator reports 2015 profit of HK$7.96 billion
Hong Kong Exchanges and Clearing (HKEx), the operator of the city’s stock and futures markets, said it would continue to develop a new listing regime and would not rule out acquisitions after reporting a 34 per cent quarterly drop in net profit in the fourth quarter of last year.
HKEx chief executive Charles Li Xiaojia admitted business had been worse since the fourth quarter, continuing into the first two months of this year.
Giving the quarterly breakdown at its results press conference on Wednesday, the exchange reported its fourth-quarter net profit stood at HK$1.53 billion, down 34.33 per cent from the third quarter but up 1.32 per cent year on year.
On a full-year basis, however, HKEx reported that its profit rose by 54 per cent last year to HK$7.96 billion, slightly beating analysts’ expectations of HK$7.93 billion.
“The beginning of this year was worse than last year but I do not know if the momentum will continue for the rest of this year,” Li said.
Even though it was facing tough times ahead, Li said the exchange would continue to work with the Securities and Futures Commission to prepare a consultation paper on revamping the Growth Enterprise Market and the possible launch of a third board. It would also continue study a bond connect scheme with the Shanghai Stock Exchange. Although Beijing announced last week it would open the onshore bond market to large institutional investors, he said retail investors and small institutional investors would like to trade mainland bonds via a bond connect, which he said would be convenient.
He said he believed the potential merger between the London Stock Exchange and Deutsche Bourse would have a significant impact on the local exchange but declined to comment on the competitive pressures on Hong Kong. Nor did he say whether HKEx would consider mergers as well.
“We are busy doing a lot of things and do not have time to go shopping,” he said. “We would not actively look for acquisition opportunities but if a good opportunity arises, we will consider it.”
HKEx chairman Chow Chung-kong said higher turnover in the stock market, mainly in the second quarter, a solid contribution from London Metal Exchange (LME) and a large number of initial public offerings last year all contributed to strong growth. However, he warned of challenges ahead.
“The political instability spreading from the Middle East to Europe, the pace of the US interest rate-hike cycle, the fall in global commodities prices, and the slowdown in the mainland economy have all cast a shadow over the global financial market,” Chow said in a statement accompanying the results announcement.
“In Hong Kong, in anticipation of possible increases in Hong Kong interest rates, there have been corrections in asset values since mid-2015. At HKEx, we will continue our efforts to sharpen our competitiveness to meet the challenges ahead.”
Higher turnover in the stock market helped deliver a 41 per cent annual increase in trading fee income at HK$2.25 billion. The average daily turnover of the Hong Kong stock market last year was a record HK$105.6 billion, up 52.08 per cent on 2014.
Listing fee income rose 8 per cent last year to HK$703 million. A clampdown on new listings in mainland China saw mainland companies turning towards Hong Kong, lifting HKEx into the No 1 spot for initial public offerings globally last year. In total, 138 companies debuted on the exchange, an increase of 13 per cent from the previous year. Total funds raised from the listings came to HK$261.33 billion, up 12.39 per cent year on year.
HKEx’s wholly owned LME also saw increased trading fee income. For the year, the LME contributed HK$1.40 billion, a rise of 51 per cent.
HKEx’s total revenue was up 24 per cent to HK$3.44 billion, while operating expenses rose 15 per cent to HK$531 million.
HKEx announced a final dividend of HK$2.87 per share, bringing the whole-year dividend to HK$5.95, up 49 per cent from a year earlier.
Meanwhile, companies already listed on the exchange raised HK$847.66 billion through share placements, rights issues and other secondary market fundraising activities, an increase of 19.36 per cent on 2014.
In the third quarter, the exchange reported 81 per cent year-on-year growth in net profit to HK$2.33 billion, helped by a one-off gain from the sale of a leasehold property for HK$445 million.
Brokers, however, cautioned that HKEx was likely to experience more difficultly in 2016, as the daily turnover on the exchange dropped to as low as HK$60 billion last week, a 40 per cent decline from last year’s daily average.
HKEx shares closed at HK$175 on Wednesday, up 3.49 per cent from Tuesday’s close. That compares with a one-year low of HK$160.10 and a high of HK$311.40 in April last year.