Hong Kong Bourse Quarterly Profit Rises 20% as Trading Jumps

Hong Kong Exchanges & Clearing Ltd., the world’s second-biggest bourse operator by market value, said profit climbed 20 percent last quarter from a year earlier as trading of shares and derivatives jumped.

Net income increased to HK$1.2 billion ($155 million) in the three months through Sept. 30 from HK$1 billion a year before, according to a statement today. The profit compares with the HK$1.07 billion mean estimate of three analysts surveyed by Bloomberg. The average daily value of stocks traded on the exchange surged 19 percent, while the number of derivatives contracts bought and sold each day rose 18 percent.

Trading climbed as the Hang Seng Index, the worst performer among developed markets tracked by Bloomberg in the first half of 2013, rebounded 16 percent from a June 24. The London Metal Exchange, which the Asian bourse bought for $2.2 billion in December to expand into commodities, contributed HK$318 million of profit in the first nine months of the year, Hong Kong Exchanges said today. The LME is seeking its first foothold in mainland China, while facing increasing regulatory scrutiny of its global warehouse network.

“LME has made some kind of an impact,” Matthew Smith, an analyst at Macquarie Group Ltd., said by phone today, adding that the profit figures were in line with his expectations. “In terms of growth going forward, the mainland warehousing is one issue. If it does happen, it would justify or come close to justifying why they did the deal in the first place.”

LME Lawsuits

Establishing LME’s first warehouses in mainland China is a long-term aspiration, Hong Kong Exchanges Chief Executive Officer Charles Li said in June. The earnings from LME in the first nine months of the year equated to about 9 percent of the Hong Kong bourse’s HK$3.5 billion profit in the period, according to today’s statement.

The commodities exchange has been named as a co-defendant in 18 class-action lawsuits filed in five U.S. district courts, Hong Kong Exchanges said today. All the claims allege anti-competitive behavior in the warehousing industry in connection with aluminum prices.

“Based on legal advice, an increase in the number of similar class actions filed since the first lawsuit surfaced in August 2013 does not increase the extent of the companies’ liability, if any,” Hong Kong Exchanges said. “LME management continues to take the view that the lawsuits are without merit and that both companies will contest them vigorously.”

Shares Rise

Hong Kong Exchanges shares rose 0.6 percent to HK$125.90, reversing an earlier decline of as much as 0.6 percent and paring their 2013 drop to 4.6 percent. The Bloomberg World Exchanges Index climbed 19 percent this year through yesterday, while the Hang Seng Index added 1.7 percent.

Funds raised through initial public offerings in Hong Kong increased 34 percent to HK$18.2 billion last quarter from the same period a year earlier, according to the exchange operator’s quarterly report.

Li last month called for a debate on how to handle “innovative companies,” after losing out on hosting Alibaba Group Holding Ltd.’s IPO because the exchange wouldn’t bend its rules to allow partners to nominate the majority of the board. Alibaba may have raised about HK$100 billion in an initial sale, Ernst & Young LLP said in June.

Trading Volumes

The average daily value of shares bought and sold on the exchange rose 19 percent to HK$55.2 billion in the three months through Sept. 30 from the same part of 2012, Hong Kong Exchanges said today. The value of shares traded on the Tokyo Stock Exchange more than doubled in the same period, while Singapore’s bourse saw a 0.3 percent decline, according to data from each company’s website.

China’s services Purchasing Managers’ Index climbed to 56.3 in October from 55.4 in September, a government report showed Nov. 3. The increase follows better-than-estimated readings for two gauges of manufacturing activity last week.

“Mainland China’s economy remains strong and is likely to grow by more than 7 percent again this year, which has provided some positive momentum,” Chow Chung Kong, Hong Kong Exchanges’s chairman, said in the statement.

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