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Hong Kong Exchanges Net Income Beats Estimates on Investments

Traders monitor transactions at the Hong Kong Exchanges and Clearing Ltd. in Hong Kong, China. Photographer: Daniel J. Groshong/Bloomberg
Traders monitor transactions at the Hong Kong Exchanges and Clearing Ltd. in Hong Kong, China. Photographer: Daniel J. Groshong/Bloomberg

May 8 (Bloomberg) -- Hong Kong Exchanges & Clearing Ltd., the world’s second-biggest bourse by market value, said first-quarter profit fell 7 percent, less than analysts expected, as listing fees held steady and investment income improved.

Net income slid to HK$1.15 billion ($148 million) from HK$1.24 billion a year earlier, the company said in a filing yesterday. That compares with the average HK$1.12 billion estimate from four analysts surveyed by Bloomberg. Listing fees dropped 1 percent from a year earlier to HK$244 million, as net investment income doubled to HK$227 million, it said.

“The bourse’s investment income was higher than expected and that’s masked the increase in operating costs,” said Sam Hilton, a Hong Kong-based analyst at Keefe Bruyette & Woods Asia whose coverage includes Asian exchange companies. “Assuming trading volumes remain weak, we’re likely to see another challenging quarter ahead.”

Hong Kong Exchanges is studying an offer for the London Metal Exchange, the world’s biggest metals trading platform, as it seeks to add commodities to its offerings while large initial public offerings from China slow and trading volume drops. The average daily value of shares traded fell 17 percent from a year earlier to HK$63.2 billion in the first quarter, according to exchange.

Operating expenses climbed 20 percent from a year earlier to HK$532 million during the quarter, according to the exchange. Staff and related costs increased 20 percent, while legal and professional fees jumped 180 percent, it said.

The bourse’s shares slid 1.9 percent to HK$121.70 at the close in Hong Kong yesterday, before the earnings announcement, bringing its losses this year to 1.9 percent. That compares with an 11 percent rally in the Hang Seng Index in 2012.

New Listings

Eighteen companies including Canadian energy explorer Sunshine Oilsands Ltd. debuted their shares on the bourse in the first quarter, the same number as last year, HKEX said.

Hong Kong Exchanges said on April 30 that it was one of several interested parties looking to buy the LME, which handles more than 80 percent of global trade in metal futures. The London bourse received preliminary bids from CME, NYSE Euronext an IntercontinentalExchange Inc., three people with direct knowledge of the matter said in February. Offers for the LME had to be submitted by yesterday.

Chow Chung-Kong, former chief executive officer of subway operator MTR Corp., was named chairman of the Hong Kong bourse on April 24. He replaced Ronald Arculli, who stepped down after serving a maximum term of six years.

To contact the reporters on this story: Eleni Himaras in Hong Kong at ehimaras@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net

To contact the editors responsible for this story: John McCluskey at j.mccluskey@bloomberg.net; Joshua Fellman at jfellman@bloomberg.net

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