Aug. 15 (Bloomberg) -- Hong Kong Exchanges & Clearing Ltd., operator of Asia's third-largest stock market, fell to the lowest close in more than a week on concern a downturn in global markets may make it hard for the company to repeat record earnings.

The stock dropped 4.3 percent to HK$120, the lowest since Aug. 7. The benchmark Hang Seng Index also slumped as investors bet U.S. subprime mortgage losses will spread, damping global economic growth and appetite for equities. The volume of securities traded on the exchange declined 29 percent over last week, the biggest drop in almost six months.

``Turnover at Hong Kong Exchanges might see short-term pressure given the current market situation as global investors might be in a risk-reduction mode,'' said Lei Wang, who helps manage $12 billion at Thornburg International Value Fund in Santa Fe, New Mexico, including Hong Kong Exchanges shares.

Hong Kong Exchanges said today profit more than doubled to a record HK$1.41 billion ($180 million), or HK$1.31 a share, in the three months ended June 30.

More measures by China to slow its economic growth and ``global economic performance amid worries over the U.S. subprime mortgage problems'' may lead to uncertainties and volatility in Hong Kong's cash and derivatives markets, the company said in a statement.

Limited Potential

There may also be limited potential for further gains in the company's share price and revenue from trades, said Edgar Chuan, who helps manage $300 million at Descartes Investment Management in Hong Kong.

``A lot of the good factors have been priced in,'' he said, adding that he may start to buy the stock if its price-earnings multiple fell to 25, from 34 now. ``Right now, people are looking at where the market is going to stabilize.''

The company's shares have risen 40 percent this year, making it the second-best performer among the 39 members on the Hang Seng index.

In the longer term, Thornburg's Wang said, Hong Kong Exchanges is ``well-positioned to gain'' from funds flowing out of China as the country liberalizes its financial policies.

Hong Kong Exchanges said it plans to introduce depositary receipts to enable companies that are already traded in other markets to list on the bourse.

The receipts may be launched by the third quarter of next year, Chief Executive Officer Paul Chow said at a briefing in Hong Kong.

Overseas Companies

``It's simply an easier means by which companies overseas can list in Hong Kong,'' Chairman Ron Arculli said in an interview later.

In the first half, executives from Hong Kong Exchanges made 15 visits to Malaysia, South Korea, Taiwan, Thailand, Kazakhstan, Russia and Vietnam to encourage companies there to list in Hong Kong. They also made more than 30 trips to Chinese cities, the company said in its statement.

As for concerns that fewer Chinese companies will apply for initial public offerings in Hong Kong as the mainland government encourages them to list in either Shanghai or Shenzhen instead, Chow said the operator hasn't seen any such decrease.

``Every month, we are receiving applications. We don't see our workload decreasing,'' he said.

As of Aug. 14, 46 companies have listed on the Hong Kong stock exchange for the year, including 25 from China. An additional 13 IPO applications have been approved, of which 11 are from China, though the shares aren't yet trading.

Hong Kong Exchanges is in the midst of processing 32 applications for IPOs, 23 of which are for mainland Chinese companies, Chow said.

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

Last Updated: August 15, 2007 08:19 EDT