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Hong Kong Exchanges Quarterly Profit Rises on Higher Fees

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May 8 (Bloomberg) -- Hong Kong Exchanges & Clearing Ltd., the world’s third-biggest bourse operator by market value, said first-quarter profit climbed as fees increased.

Net income rose 1.7 percent to HK$1.18 billion ($152 million) in the three months through March 31, from HK$1.16 billion a year earlier, the company said today in a statement. That compares with the HK$1.14 billion average estimate of five analysts compiled by Bloomberg.

The average daily value of shares bought and sold fell 5 percent to HK$55.1 billion on the exchange’s main board, Hong Kong Exchanges said. Shares of the bourse operator slipped 9 percent in the first three months of this year as China’s data from manufacturing to industrial production fueled concern growth in the world’s second-biggest economy is slowing. The stock climbed 2 percent to HK$139 at the trading break in the city, compared with a 0.5 percent gain for the benchmark Hang Seng Index.

“In the short term, the result is not the market’s focus,” said Kenny Tang, general manager of AMTD Financial Planning Ltd. “The long-term prospect is much more important because there is hope the link with the Shanghai stock exchange will increase turnover a lot by attracting more mainland investors to trade Hong Kong stocks. This is unique to HKEx, so it might attract more large overseas companies to list in Hong Kong and increase listing-fee income.”

While turnover dropped in the first quarter, the number of initial public offerings on the main board climbed to 18 from 10 a year earlier, according to the bourse’s website. Funds raised from the share sales jumped to HK$45.5 billion from HK$8.12 billion a year earlier after Power Assets Holdings Ltd. raised HK$24.1 billion in an initial public offering of HK Electric Investments.

Fee Increases

“The higher income reflects increased fees from commodities trading, additional listing fees, higher brokerage fees on initial public offering allotments, and an increase in clearing fees,” according to the statement.

Investors rushed to buy the shares in the city’s bourse last month after the city’s regulator and China Securities Regulatory Commission unveiled plans on April 10 to connect the stock exchanges of Hong Kong and Shanghai for cross-border trading.

Hong Kong Exchanges jumped the most in more than five years following that announcement on speculation it will benefit from higher trading volume as mainland investors gain access to shares listed in the city. The stock has since lost 4.8 percent.

Since the first quarter, the exchange said it plans to introduce futures contracts on thermal coal and industrial metals, a first step to enable mainland commodity users and producers to gain access to international markets restricted to them and vice versa.

The London Metal Exchange, which Hong Kong Exchanges bought for $2.2 billion in December 2012 to expand into commodities, pushed revenue and other income from commodities up by 7 percent to HK$315 million in the first quarter, the Asian bourse said.

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

To contact the editors responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net John McCluskey

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