Hong Kong Bourse Profit Falls 20% as Turnover, IPOs Drop

Hong Kong Exchanges & Clearing Ltd. (388), the world’s largest exchange operator by market value, said full-year profit plunged 20 percent, the first drop in three years, as turnover and listings fell amid concerns of an economic slowdown in China and Europe’s debt crisis.

Net income fell to HK$4.08 billion ($526 million), or HK$3.74 a share, for the year ended Dec. 31, from HK$5.09 billion, or HK$4.70 a share, a year earlier, the company said in a statement today. That compares with the average HK$4.29 billion estimate of 20 analysts surveyed by Bloomberg News.

Global equity volumes plunged last year, squeezing exchanges and brokerages as slowing growth in China and the U.S., plus Europe’s sovereign-debt crisis, sapped investor confidence. Hong Kong Exchanges bought the London Metal Exchange for $2.2 billion in December as Chief Executive Charles Li seeks to transform the bourse into a global operator to compete with other exchanges in the region.

“Investors are now watching closely the LME development to see if it will have a positive impact on the stock exchange,” said Ben Kwong, chief operating officer at brokerage KGI Asia Ltd. in Hong Kong. The company’s shares are likely to trade between HK$130 and HK$150 “until there’s a fresh catalyst for earnings. It all depends on market activities in the coming months.”

Photographer: Lam Yik Fei/Bloomberg

Stock traders work on the floor of the Hong Kong Stock Exchange in Hong Kong. Close

Stock traders work on the floor of the Hong Kong Stock Exchange in Hong Kong.

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Photographer: Lam Yik Fei/Bloomberg

Stock traders work on the floor of the Hong Kong Stock Exchange in Hong Kong.

Hong Kong Exchanges rose 0.8 percent to HK$138.90 at the midday trading break today, compared with a 0.5 percent gain by the benchmark Hang Seng Index. (HSI) The stock rose 4.5 percent this year through yesterday, and are traded at about 29.5 times estimated earnings, compared with 25.2 times for the Singapore Exchange Ltd. (SGX) and 18.1 times for the Australian counterpart ASX Ltd.

To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

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