Aug. 13 (Bloomberg) -- Hong Kong Exchanges & Clearing Ltd., operator of Asia's third-biggest stock market, posted its first drop in quarterly profit in three years, as the absence of one- off gains countered revenue from higher trading volume.

Net income declined 6 percent to HK$1.32 billion ($169 million), or HK$1.23 a share, from HK$1.41 billion, or HK$1.31, a year earlier, the company said in a statement today. Last year's profit included a one-time gain of HK$206 million from the sale of a stake in Computershare Hong Kong Investor Service Ltd.

HKEx CEO Paul Chow has overseen a 53 percent fall in the bourse operator's shares this year as concern over the impact of a U.S. slowdown and economic tightening measures in China dragged the average daily trading value 26 percent lower in the quarter, according to data compiled by Bloomberg. Rival Singapore Exchange Ltd. last week reported that fourth quarter profit had halved.

``In all likelihood, the year-on-year comparisons for turnover and presumably profit are going to be negative for the rest of this year,'' Sam Hilton, a Hong Kong-based analyst at Fox-Pitt Kelton Asia Ltd., said before today's announcement.

Earnings met the median HK$1.35 billion estimate of five analysts surveyed by Bloomberg News. Revenue rose 10 percent to HK$1.93 billion from HK$1.76 billion. The value of daily trading averaged HK$75.8 billion in the second quarter, compared with HK$65.1 billion a year earlier, according to Bloomberg data.

Shares in Hong Kong Exchanges fell 3.1 percent to close at HK$103.50 today, the lowest since July 8.

China's Tightening Measures

The Hang Seng benchmark index is down 23 percent this year compared with a 39 percent gain in 2007. The daily average value of shares traded dropped to HK$63 billion in July, from a record HK$165 billion in October last year.

The second half of 2008 ``will be challenging,'' Hong Kong Exchanges said in today's statement, noting that the global credit crunch and escalating oil prices affected investor sentiment in the past six months.

Hong Kong's stock market has been pressured by a 55 percent loss for China's equity market on concern rising fuel prices and central bank measures to curb inflation and economic overheating will hurt earnings.

Income related to market turnover rose 13 percent in the period to HK$1.27 billion, Hong Kong Exchanges said. It contributed to 66 percent in overall income, the company's figures show.

Listing fees generated HK$164.8 million of income, the statement said. The company declared an interim dividend of HK$2.49 a share, from HK$1.79 a year earlier.

IPOs Falter

Hong Kong Exchanges said first-half profit rose 28 percent to HK$2.97 billion, or HK$2.76 a share, from HK$2.33 billion, or HK$2.16, a year earlier. Revenue rose to HK$4.21 billion from HK$3.16 billion.

During the six months, initial public offerings have raised HK$49.3 billion, or the lowest amount since 2003 as falling prices deter potential sales, according to Bloomberg data.

Although there was a record 106 IPO applications in the first seven months, funds raised declined to HK$57.4 billion, Chow told media in a briefing in Hong Kong today.

Singapore Exchange, which operates the city-state's securities and derivatives markets, said last week net income in the three months ended June 30 dropped 49 percent to S$90.4 million ($64 million) as a faltering economy knocked trading. While revenue from securities trading fell 23 percent, derivatives transactions rose 21 percent, it said.

To contact the reporter on this story: Chia-Peck Wong in Hong Kong at cpwong@bloomberg.net.

Last Updated: August 13, 2008 05:54 EDT