Hong Kong stock market operator sees record first-quarter profit as new listings and turnover rise

Some analysts point to possibility of weaker result in the current quarter, with a lower number than expected of applications under new listing reforms

PUBLISHED : Wednesday, 09 May, 2018, 6:41pm
UPDATED : Wednesday, 09 May, 2018, 11:54pm

Stock exchange operator Hong Kong Exchanges and Clearing (HKEX) reported a 49 per cent rise in profit for the first quarter, thanks to higher turnover and more new listings, sending its shares up as much as 2 per cent on Wednesday.

HKEX, which has just completed its largest listing reforms in three decades in a bid to attract more companies, posted net profit of HK$2.56 billion (US$326.12 million) for the first quarter, up from HK$1.72 billion in the same period a year ago and a record for a single quarter.

The results beat expectations of a net profit of HK$2.31 billion in a poll of analysts by Thomson Reuters. Earnings per share is HK$2.07.

The bourse has revamped its listing rules to try and make itself more attractive as a listing destination, particularly for big technology firms, which will now be allowed to list if they have dual-class share structures. However some analysts cautioned that the outlook for the bourse may not be so rosy in the current three months.

“Turnover and new listings were high in the first quarter,” said Christopher Cheung Wah-fung, a lawmaker for the financial services industry, who is also a stockbroker.

“However, the outlook for the second quarter may not be so optimistic. Turnover has gone down recently as markets globally are volatile, while the number of applications under the new listing regime is slower than expected. These factors would affect the result of the HKEX in the second quarter,” Cheung said.

Hong Kong’s new listing rules draw just two applications, far fewer than expected

HKEX shares rose as much as 2 per cent in the afternoon session after the release of its earnings, before closing at HK$257, up 0.31 per cent.

First-quarter profit was the highest for a single quarter at HKEX since its establishment in 2000, and was lifted by a 96 per cent rise in trading fee income to HK$676 million from improved turnover. Average daily turnover stood at HK$146 billion during the first three months this year, up 97 per cent from HK$74.3 billion in the same quarter a year earlier.

The benchmark Hang Seng Index rose 10 per cent in January to reach a record high of 33,484 points on January 29, before falling back in the following two months.

Listing fees meanwhile rose by a total of HK$28 million, with a HK$16 million increase in annual listing fees from a higher number of listed companies and a HK$12 million increase in initial listing fees due to more IPOs. There were 69 new listings on the main board and the GEM second board for growth firms in the first quarter, up from 40 a year earlier.

New Hong Kong dual-share listings to be tradeable through Stock Connect schemes

A jump in revenue from the two Stock Connect schemes that link the Hong Kong bourse with its Shanghai and Shenzhen counterparts to facilitate two-way trading also helped the HKEX in the first quarter. The schemes brought in combined revenue at HK$172 million, more than double the HK$75 million in the same period last year.