Hong Kong company reporting season

HKEX profit up 20pc to HK$1.72 billion in first quarter

Figures include one-off gain of a HK$55m interest payment from the liquidation of Leman Brothers, but even excluding that, profit growth was 16 per cent to HK$1.67b

PUBLISHED : Wednesday, 10 May, 2017, 1:25pm
UPDATED : Wednesday, 10 May, 2017, 10:48pm

Hong Kong Exchanges and Clearing (HKEX), which runs the city’s stock and futures markets and owns the London Metal Exchange, has reported better-than-expected net profit growth of 20 per cent for the first quarter of the year.

Net profit in the first three months was HK$1.72 billion (US$22.95 million), or HK$1.41 per share, compared with HK$1.43 billion a year earlier.

The figures were better than market expectations of 3.5 per cent profit growth to HK$1.48 billion, according to analysts consensus polled by Thomson Reuters. It released the numbers during the exchange’s lunchtime break on Wednesday

The rise in profit was party due to an one-off gain of a HK$55 million interest payment from the liquidation of Lehman Brothers. Excluding that, it still reported profit growth of 16 per cent to HK$1.67 billion, still higher than estimates.

HKEX chief executive Charles Li Xiaojia said: “As CEO, I will never be satisfied with the result. Although the profit growth is good I always like to think we can do even better.”

Li said the exchange this year will introduce more new products and connect schemes to attract more turnover.

This includes two new gold futures products which he hoped would be launched in the first week of July as well as an iron ore contracts. All these new products are pending approval by the Securities and Futures Commission.

The exchange is also keen on getting Saudi Aramco to list in Hong Kong, which is expected to be the largest initial public offering worldwide to raise US$100 billion. Markets expect the Saudi Arabia oil company to sell 5 per cent of the firm, valuing the business at US$2 trillion.

New York, London, Hong Kong and Tokyo are in the race to capture its listing.

The stock exchange will try our best to capture this mega company [Saudi Aramco]to list here. This is important to our market
Charles Li Xiaojia, chief executive, HKEX

“The stock exchange will try our best to capture this mega company to list here. This is important to our market,” Li said.

The strong result announced at the lunch break led the share price to rise 1.9 per cent to a two-month high of HK$198 in early afternoon trading, before falling back to close 0.1 per cent lower at HK$194.2.

“The driving forces of profitability in the first quarter were rising stock market turnover and increased numbers of new listings,” said Kevin Tai Yiu-kuen, chief operating officer of Sun Hung Kai Financial.

Average daily turnover on the Hong Kong stock market in the period rose 2 per cent year on year to HK$74.3 billion.

The number of new listings doubled to 40 compared with a year earlier, but funds raised dropped 56.1 per cent to HK$13.28 billion, due to the lack of any major new listings.

Looking ahead, Tai said turnover is expected to rise in coming months, delivering better fee income to the exchange.

Bond Connect launch details expected within weeks

‘The Hang Seng Index rose to 21-month high on Tuesday and better market sentiment should be able to encourage more investors to buy,” Tai said.

“In addition, the new Bond Connect which is expected to be launched in the next few months will also hopefully bring in more trading and fee income to HKEX, although commodities trading at the LME faces challenges during the rest of this year.”