February 27, 2013 7:02 am

HKEx annual profit hit by listings slump

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Hong Kong Exchanges & Clearing, the world’s largest bourse operator by market capitalisation, has reported a worse than expected slide in full-year net profit amid weak trading volumes and a dearth of new listings.

Net profit fell 20 per cent to HK$4.1bn ($528m) for the year ended December 31, HKEx said on Wednesday. That compared with expectations of HK$4.4bn from analysts polled by Thomson Reuters.

Average daily trading turnover in cash equities and stock options contracts both declined more than 20 per cent from the previous year.

Hong Kong suffered a difficult year for initial public offerings in 2012. The city dropped to fourth in the global ranking for new listings, having topped the table for the previous three years. Total value of IPOs on the Hong Kong exchange sank 70 per cent in 2012 to $8bn, according to Dealogic.

HKEx recently unveiled a three-year strategic plan that it hopes will transform the exchange into the leading gateway for mainland Chinese investors seeking a path to the rest of the world. To that aim, it has been adding new renminbi-denominated products, such as exchange-traded funds linked to Chinese equities.

The company has also sought to diversify its business away from a reliance on equities through the $2.2bn purchase last year of the London Metals Exchange, which it hopes will enable it to achieve a “breakthrough” in commodities trading.

“The road to building HKEx into a leading vertically integrated multi-asset class exchange is long. We have crystallised our vision and mission and embarked on our journey. Now we must focus on reaching our destination,” said Charles Li, HKEx chief executive.

Although trading volumes through the year were significantly below 2011 levels, activity did pick up slightly in the fourth quarter in line with an increasing appetite among international investors for China-related assets. Average daily turnover in stock trading rose to HK$56bn in the final quarter, up from HK$46bn in the previous quarter.

Analysts are also more upbeat about the prospects for Hong Kong’s IPO market this year. The exchange has enjoyed its best start to the year since 2010, and two sizeable new listings are expected before the end of the second quarter.

Shares in HKEx were 0.7 per cent lower after the earnings release in mid-afternoon trading. The stock has risen 30 per cent in the past six months, while the Hang Seng index has risen 14 per cent.

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