HKEX to launch new board consultation in first half after 2016 profits fall on shrinking transactions
Full year earnings weighed down by 37 per cent decline in stock market transactions and 57 per cent slump in funds raised by companies
Hong Kong Exchanges and Clearing plans to launch a new third board and more new products and connect schemes to boost turnover and new listings after it reported a worse than expected 27 per cent drop in profit last year.
The exchange operator will launch a consultation in the first half of this year on the proposed launch of a third board to attract more start-up and tech firms to list in the city, and will also review the Growth Enterprise Market, according to HKEX chief executive Charles Li Xiaojia.
“We will consult the market about the launch of the new board to attract start-ups and companies with dual share structures. We want a market to attract new listings while at the same time ensuring that investors get protection,” he said. “We support the Securities and Futures Commission action to crack down on alleged manipulation in the GEM market recently.”
Li also said the exchange will introduce two gold products and two yuan products this year, while it will also launch additional connect schemes such as ETFs, primary connects and bond markets between Hong Kong and the mainland to boost turnover.
HKEX unveiled the plans to boost listings and turnover after the bourse report a net profit that missed analysts’ forecasts, weighed down by dwindling transactions in the stock market and a fall in the number of companies seeking to raise capital.
Net income fell 27 per cent to HK$5.77 billion (US$740 million), or HK$2.04 per share, less than the HK$6.06 billion average estimate in a Bloomberg survey of 14 analysts.
HKEX has suffered as turnover on the bourse shrank 37 per cent last year, reducing the average daily transaction value to HK$66.9 billion. The exchange operator’s main source of income are fees charged on transactions and securities clearance in the market.
For the fourth quarter, profit stood at HK$1.24 billion, down 19 per cent from the same period a year earlier.
“Looking ahead to the rest of 2017, the operating environment for financial markets is expected to
remain challenging,” HKEX chairman Chow Chung Kong said in a statement announcing the results.
Another major source of income for the operator are fees levied on companies that choose Hong Kong as their market for raising capital, either through initial public offerings (IPOs) or rights issues. Total funds raised plunged 57 per cent to an eight-year low of US$39.4 billion last year, according to Thomson Reuters data. Proceeds raised through IPOs on the Hong Kong bourse fell 26 per cent to US$24.35 billion.
HKEX will pay a final dividend of HK$2.04 per share, bringing the operator’s full-year payout to HK$4.25 per share, 29 per cent less than in 2015.
Shares of the bourse operator fell 1.3 per cent to close at HK$195.4 on Monday after the results were announced at the lunch break. The stock has risen 8 per cent this year.
“It’ll be important for the HKEX to continue to explore ways to get more turnover and new listings,” said Christopher Cheung Wah-fung, a broker who is also the lawmaker representing Hong Kong’s financial services sector. “We hope the HKEX can launch more trading schemes that can link Hong Kong’s stock market with mainland China, and create a new board soon to attract more technology companies to raise capital here.”