Hong Kong’s exchange operator posts record first-half earnings as global funds follow MSCI’s weightings into China’s stocks
- First-half sales rose 5 per cent to HK$8.58 billion while net profit grew 3 per cent to a record HK$5.2 billion
- Outlook for the second half looks gloomy, as Hong Kong’s economy had been squeezed by the year-long US-China trade war, while an unprecedented level of civic unrest had soured moods in the city
Hong Kong Exchanges & Clearing Limited (HKEX) reported its best interim profit on record as more global funds used the city’s cross-border investment channel to invest in Chinese stocks, after MSCI quadrupled the representation of China’s A shares in its benchmarks.
Revenue rose 5 per cent to HK$8.58 billion (US$1.1 billion) in the first half, while net profit increased 3 per cent to HK$5.2 billion, the highest since the bourse was established in 2000. Second-quarter profit advanced 5 per cent to HK$2.6 billion, missing the 9 per cent growth expected by analysts in a Bloomberg poll.
International capital poured into Chinese stocks in the second quarter after MSCI announced its three-stage implementation in February, boosting income from the so-called Stock Connect investment channels by 39 per cent to a record HK$508 million, the exchange said.
“HKEX had a solid first half in 2019 despite a more challenging political and economic backdrop. Record Stock Connect revenue, a robust pipeline [of initial public offerings (IPOs)] and good returns from investment income offset some macro-driven softness in cash market volumes,” said Charles Li Xiaojia, HKEX’s chief executive, in a statement.
MSCI, the compiler of the most-followed stock market benchmarks, said in February that it would quadruple the weighting of China’s A shares to 20 per cent from 5 per cent, in a three-stage process ending in November. That draws international capital, especially from passive investors, who benchmark their performances against the index.