Hong Kong Exchange Profit Falls on Lower Securities Trading

  • Timing of less critical projects deferred to control costs
  • Stock link to Shenzhen may be trading catalyst, analyst says

Hong Kong Exchanges & Clearing Ltd., Asia’s biggest exchange operator by market capitalization, said first-half earnings declined 27 percent on lower securities and commodities trading.

Net income decreased to HK$2.99 billion ($386 million) in the period, down from HK$4.1 billion a year earlier, the exchange said in a statement on Wednesday. Revenue fell 18 percent to HK$5.63 billion.

HKEx shares have fallen 37 percent from their May 2015 record high, in part because of China’s stock market selloff and falling volumes, Bloomberg Intelligence analyst Francis Chan said in a report. Companies domiciled in or focusing on the mainland account for about 70 percent of shares trading in Hong Kong. Average daily turnover at the bourse fell 47 percent in the first seven months compared to the year-ago period.

“During the first half of 2016, our markets experienced downward pressure on trading activity,” Chairman Chow Chung Kong said in the statement. “We believe that we are well-positioned to meet the challenges ahead and deliver long-term value for our shareholders.”

The exchange will defer the timing of less critical projects and has reduced planned headcount increases as it seeks to keep costs under control, it said. The measures will be revised in line with changes in trading conditions in the second half of the year, according to HKEx.

Shares of the company were up 0.4 percent at HK$194.80 as of 1:30 p.m. in Hong Kong trading. They are down 2 percent this year.

“The results are going to be pretty weak against a comparable period last year,” Michael Wu, a Hong Kong-based analyst at Morningstar Inc., said before the earnings report. “The launch of the Shenzhen stock connect may be a catalyst for an increase in market volume.”

Hong Kong and Beijing regulators have been planning expansion of a stock trading link between the city and the mainland, with a connection to Shenzhen due to follow the November 2014 start of a link to Shanghai. Authorities are aiming to begin the second connect this year, Chinese Premier Li Keqiang said in March.

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