Hong Kong Exchanges & Clearing Ltd., the world’s second-biggest bourse operator by market value, said profit climbed 10 percent last quarter as trading volumes rose.
Net income increased to HK$1.17 billion ($151 million) in the three months through June 30 from HK$1.07 billion in the same period a year earlier, according to a statement today. The profit compares with the HK$1.15 billion average estimate of seven analysts surveyed by Bloomberg.
Led by Chief Executive Officer Charles Li, the bourse acquired the London Metal Exchange, the largest platform for trading industrial-metals futures, for $2.2 billion in December to expand into commodities. The benchmark Hang Seng Index fell 0.5 percent this year, the only decline among developed markets tracked by Bloomberg, amid concern about China’s economy and speculation the U.S. Federal Reserve will pare stimulus.
“People are still very cautious toward China,” said Alex Wong, a Hong Kong-based director at Ample Capital Ltd., adding that trading volumes had fallen since the beginning of the third quarter. “There have been some encouraging signs in economic numbers but people may not be too confident yet, so I think turnover will remain at a sub-par level.”
The bourse operator’s stock rose 0.2 percent to HK$126.50 in Hong Kong trading, paring its 2013 decline to 4.1 percent. The Bloomberg World Exchanges Index rose 17 percent this year through yesterday.
Data last week showed China’s industrial output beat estimates, after a two-quarter slowdown in economic growth. The U.S. central bank, led by Chairman Ben S. Bernanke, will probably reduce its $85 billion in monthly bond purchases at its meeting on Sept. 17-18, according to 65 percent of economists surveyed by Bloomberg from Aug. 9 to Aug. 13.
“Looking forward, the global financial market remains challenging, in particular with the anticipated unwinding of the liquidity easing policy in the U.S,” Chow Chung Kong, Hong Kong Exchanges’ chairman, said in the statement. “Trading activities at HKEx in the first half of 2013 were better than those in the corresponding period last year.”
The daily average value of shares bought and sold in Hong Kong rose 20 percent to HK$68.3 billion in the six months through June from the same part of 2012, according to the statement. That compares with a 130 percent surge on Japan’s Topix Index and a 32 percent jump in Singapore, according to data compiled by Bloomberg. Average daily turnover in Australia rose 16 percent.
The LME contributed about 11 percent of Hong Kong Exchanges’ HK$2.33 billion profit in the first half of the year, according to today’s statement. The average daily volume of LME metals contracts traded rose 13 percent, compared with a 5 percent gain in the first three months of the year.
Hong Kong Exchanges’ equity rating was upgraded to overweight from neutral this week at JPMorgan Chase & Co. on expectations of increased trading volume in coming months, while the June 2014 price target was cut to HK$135 from HK$155.
“We expect volumes to improve by 10 percent in the next three months, before subsiding in December,” JPMorgan analysts Harsh Wardhan Modi in Singapore and Josh Klaczek in Hong Kong wrote in a note dated Aug. 12. “This pick-up in volumes should lead to the stock price moving up in tandem.”
Revenue increased 17 percent in the second quarter to HK$2.2 billion, Hong Kong Exchanges said. Operating expenses climbed 37 percent to HK$672 million. Costs rose last half as the bourse included expenses from LME, it said.
LME is considering three candidates to replace Chief Executive Officer Martin Abbott, who plans to leave at year-end, two people familiar with the process said this month. The commodities exchange is also fending off an antitrust lawsuit in the U.S. on allegations the company conspired with banks to drive up costs to restrain aluminum supplies.
“LME management’s initial assessment is that the suits are without merit and LME will contest them vigorously,” Hong Kong Exchanges said in today’s statement.
Funds raised through initial public offerings in Hong Kong jumped 29 percent in the first six months of the year to HK$39.7 billion, while futures and options turnover reached a record on June 25, Hong Kong Exchanges said. The exchange operator this month introduced contracts linked to the CES China 120 Index, which tracks the most liquid shares listed in both Hong Kong and the mainland.