Hong Kong Exchanges and Clearing, which operates the local stock and futures markets, is expected to report a decline of up to 20 per cent in net profit last year as a result of lower market turnover and fewer initial public offerings (IPOs).
Analysts estimated profit could drop 12 to 20 per cent to between HK$4 billion and HK$4.5 billion in the year to December.
Announcement of the results is due on Wednesday.
Kenny Lee Yiu-sun, the chief executive of First China Securities, said the lower the market turnover, the smaller the trading and clearing fees investors paid for each transaction, and hence the poor income at HKEx.
"Trading and clearing fees are the major sources of income for the exchange," he said. "As the stock market turnover dropped last year, so did the profit of the exchange."
The average daily turnover of the stock market shrank 22.77 per cent last year to HK$53.85 billion from a year earlier, which brokers blamed on the economic uncertainties in Europe and the United States.
Lee said a smaller number of IPOs hurt the income from listing fees for the exchange.
The amount of funds raised from listings last year slumped 65.43 per cent to HK$89.82 billion from 2011, taking Hong Kong's ranking in the world's IPO market to No4, compared with No1 between 2009 and 2011.
In December, HKEx completed the £1.39 billion (HK$16.34 billion) acquisition of the London Metal Exchange, the world's largest metal exchange, to diversify its business. But Lee does not think the deal can generate any profit soon.
"Although HKEx has vowed to expand into commodities trading, yuan products and futures trading in the evenings, these projects will not bring in profits immediately," he said.
In the first nine months of last year, the exchange's profit dropped 16 per cent as the average daily turnover fell 27 per cent to HK$53.1 billion.
Louis Tse Ming-kwong, a director of VC Brokerage, pointed out that the market turnover bounced back in the fourth quarter of last year, which would cushion the full-year profit decline to 12 per cent.
"The market sentiment and turnover improved 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," he said. "This would help improve the fourth-quarter result."
He said the exchange's profit would also depend on whether it could contain operating costs and boost investment income.
CCB International estimated in a research report that net profit would fall 16 per cent last year to HK$4.3 billion.
In the longer term, CCB is positive on HKEx's prospect but maintains a neutral rating for its share price.
"The recent strong momentum in the market is likely to result in sustainable high average daily turnover in 2013 along with opportunities to boost listing fees" from converting B shares to H shares, the CCB report said.
"Despite this, we maintain our neutral rating on the stock as we expect limited growth in market capitalisation and an insignificant contribution from the LME to the exchange's net profit over the next two years."