HKEX second-quarter profit falls 21%, misses estimates

HONG KONG: Hong Kong Exchanges & Clearing Ltd (HKEx), the world’s second biggest bourse by market value, said second-quarter profit fell 21%, missing analysts’ estimates as market turnover and listing fees declined.

The bourse operator rose 0.9% to HK$109.10 at the 4pm close, erasing a decline of as much as 1.8%. Net income in the quarter ended June 30 slid to HK$1.07bil (US$138mil) from HK$1.35bil a year earlier, the company said in a statement. That compares with an average HK$1.09bil estimate of four analysts surveyed by Bloomberg. Revenue and other income dropped 8% to HK$1.9bil, it said.

The company, which lost its place as the world’s biggest exchange operator by market value to CME Group Inc, is seeking to broaden its business as the pipeline of large initial public offerings from China slows and equity volumes fall. It is bidding to buy the London Metal Exchange (LME) to expand into commodities markets and is developing crossborder products with its Shenzhen and Shanghai counterparts.

“The profit decline was expected because of lower turnover,” said Jonas Kan, the head of Hong Kong research at Daiwa Capital Markets. “Going forward, it will depend on how it integrates the LME and whether the average turnover will improve.”

In the six months through June, the daily average value of shares traded in the city fell 23% to HK$56.7bil from HK$73.6bil a year earlier, the bourse said. Average turnover fell 29% during the period, it said.

Listing fees fell to HK$218mil in the second quarter, compared with HK$221mil a year earlier and HK$244mil last quarter, according to Bloomberg calculations. First-half profit slid 14% to HK$2.22bil.

“Lower risk appetite of investors drove market activity levels down in the first half of 2012,” the bourse said. “The global economic unrest – and the European sovereign debt crisis in particular – continues to be a key focus of the financial markets.”

The bourse said on June 15 it plans to pay £1.39bil (US$2.15bil) for LME, which handles more than 80% of global trade in industrial metal futures. LMEshareholders lastmonth approved the takeover offer.

The bourse cut its interim dividend to HK$1.85 a share from HK$2.16, according to the statement. It maintained a payout ratio of 90%. — Bloomberg