Hong Kong Exchanges and Clearing soundly beats estimates with 20 per cent jump in net profit in third quarter
HKEX, the local bourse operator and owner of the London Metal Exchange, said that its July-to-September quarter net profit stood at HK$2.44 billion
The Hong Kong Exchanges and Clearing on Wednesday reported a better-than-expected 20 per cent jump in its net profit during the third-quarter, after its largest listing reform in decades sparked an increase in market turnover and new listings.
HKEX, the local bourse operator and owner of the London Metal Exchange, said that its July-to-September quarter net profit stood at HK$2.44 billion (US$312 million), or HK$1.96 per share, up from HK$2.03 billion a year earlier.
The earnings beat consensus market estimates of a 4.8 per cent year-on-year growth in net profit to HK$2.13 billion for the third quarter, according to analysts polled by Bloomberg.
For the first nine months of this year, the HKEX reported net profit of HK$7.48 billion, or HK$6.03 per share, up 34 per cent from a net profit of HK$5.5 billion during the same period a year earlier.
The exchange operator is on track to achieve a full-year net profit increase of 25 per cent to HK$9.27 billion, according to consensus market estimates by Bloomberg.
“Despite the market volatilities this year, the market turnover is still higher than a year earlier, which has brought in higher trading-fee income for the exchange,” said Ben Kwong Man-bun, a director of brokerage firm KGI Asia.
“In addition, the HKEX in April carried out the listing reform to allow dual-class shareholding companies and pre-revenue biotech firms to list here. This has boosted up the number of IPOs and helped add in listing-fee income,” Kwong said.
Kwong, however, warned of challenging times ahead because the US-China trade war and interest-rate increases in the US and Hong Kong will continue to haunt the market in the fourth quarter.
But HKEX Chief Executive Charles Li Xiaojia was glowing about what is ahead.
“These results reflect the continued role that HKEX plays as the world’s centre for initial public offerings and as Asia’s most vibrant and liquid capital market,” he said. “Despite global macro economic and political headwinds, we look forward to the rest of the year with confidence.”
Trading fee income stood at HK$4.85 billion, up 40 per cent annually. The average daily turnover in the first nine month was HK$114.7 billion, up 40 per cent over the HK$82 billion in the same period in 2017, according to the HKEX data.
Listing-fee income also increased 38 per cent to HK$1.31 billion in the first nine months this year, up from HK$947 million a year earlier.
The rising listing fees resulted from a 46 per cent year-on-year increase in the number of initial public offerings (IPOs) to 166 companies during the first nine months of the year. Total funds raised by these firms rose even higher, by 177 per cent to HK$242.67 billion in the first nine months, the exchange data showed.
Hong Kong beat New York to reclaim the crown as the No. 1 market worldwide for IPOs in the first nine months of this year, according to data from Refinitiv.
The driving force was the listing reform in April, which attracted three big technology blockbusters in the third quarter. They included China Tower's US$6.9 billion IPOs in August, which was the largest worldwide this year.
The other two IPOs were of dual-class shareholdings companies: smartphone maker Xiaomi, which raised US$5.4 billion in July, and China's food delivery service platform Meituan Dianping, which attracted US$4.2 billion in September.
About 47 per cent of IPO funds raised during the third quarter were by either telecommunications or hi-tech firms. In contrast, 61 per cent of IPO funds were raised by financial firms in the same quarter a year earlier, Refinitiv data showed.
There are more than 250 companies in the IPO pipeline for next year, including many in the technology sector, Li of the HKEX said during an interview with Bloomberg Television in Singapore yesterday. At least a dozen biotech companies are expected go public under new rules designed to attract that sector, he said. Hong Kong first-time share sales have raised US$32.6 billion this year, the most of any listing venue globally, according to data compiled by Bloomberg.
“This year is so difficult and yet we have had a record year, and it looks like we’re going to end the year No. 1 globally,” Li said.
The two stock connects linking Hong Kong to the mainland brought in revenue of HK$521 million in the first nine months of this year, up 88 per cent from HK$277 million a year earlier. The two connects have linked up HKEX with Shanghai Stock Exchange since November 2014 and with the Shenzhen Stock Exchange in December 2016 for cross-border stock trading.
Revenue and other income surged 27 per cent in the first nine months to HK$12.296 billion, up from HK$9.66 billion a year earlier.
Its expenditure stood at HK$2.94 in the nine month period, up 13 per cent from HK$2.59 billion a year earlier.
Meanwhile, the LME commodity trading income was down 4 per cent.
After the announcement, HKEX shares rose as much as 4 per cent, before closing at HK$224.40, up 1 per cent.