Hong Kong Exchanges and Clearing, which operates the local stock market and futures market, reported a drop in third-quarter profit of 19 per cent amid lower market turnover, with analysts saying its fourth-quarter outlook is also far from rosy.
The exchange said its net profit for the July-September quarter stood at HK$1 billion, slightly below market estimates and down from HK$1.24 billion a year earlier. Brokers blamed the decline on the mainland's economic slowdown and the European debt crisis, which has discouraged investors from placing bets on the market.
Average daily turnover in the third quarter stood at HK$46.4 billion, down 36 per cent from a year earlier. This led the HKEx's market-related income - including trading and clearing fees - to drop 31.21 per cent year on year during the quarter to HK$551 million. Fewer new listings resulted in listing fees declining 10.93 per cent annually to HK$220 million.
"The global financial markets continued to be affected by macroeconomics, which has undermined investor confidence and Hong Kong is no exception," said Chow Chung-kong, chairman of HKEx.
Chow said market sentiment would improve in the fourth quarter after the US Federal Reserve announced in September its third round of quantitative easing measures, known as QE3, to boost the economy.
Brokers said QE3 has resulted in hot money flowing into the local market and boosting turnover slightly in October.
"But we cannot expect too much from the hot money. It may help to improve the market turnover a bit but the impact would not be substantial," said Louis Tse Ming-kwong, director of VC Brokerage. "Investors are still worried about the euro-zone crisis and the mainland economic growth slowdown.
"These factors will still haunt market sentiment and the HKEx profit in the fourth quarter."
In the first nine-months, the exchange's profit had dropped 16 per cent as average daily turnover fell 27 per cent annually to HK$53.1 billion.
After the results were announced, the price of HKEx shares closed yesterday at HK$132.10, up 2 per cent. Barclays Capital said the share price had rallied about 10 per cent since the beginning of September as investors expected the hot money flowing into Hong Kong would help boost turnover.
However, Barclays said turnover remained flat in October compared with September and was down 27 per cent year on year. "We do not see a significant increase going into the holiday season," Barclays said.
"Permanent staff headcount increased by 30 to 1,043 at the end of September, [and] the relatively fast pace of hiring continues to exert pressure on margins."