Bloomberg News

Hong Kong Exchanges Posts Rising Profit as Turnover Jumps

November 13, 2011

(Adds analyst comment in the third paragraph.)

Nov. 11 (Bloomberg) -- Hong Kong Exchanges & Clearing Ltd., the world’s biggest bourse by market value, reported its fourth straight quarterly increase in profit as turnover rose.

Third-quarter net income climbed to HK$1.24 billion ($159 million) from HK$1.22 billion a year earlier, the company said in a statement today. That compares with the HK$1.34 billion average estimate of three analysts surveyed by Bloomberg. Revenue and other income jumped 6 percent to HK$1.95 billion, it said.

“The core business is doing fine,” said Dominic Chan, an analyst at BNP Paribas SA in Hong Kong. “We like the stock long term, I think this is a key beneficiary of offshore yuan development in Hong Kong.” Chan has a “buy” rating on the stock with a target price of HK$178.54.

Hong Kong Exchanges rose 0.8 percent to HK$128.10 today as of 2:04 p.m. local time. That compares with a 1 percent gain by the benchmark Hang Seng Index. Shares of the exchange tumbled 27 percent this year through yesterday.

While listing fees increased in the nine months through September, the number of initial public offerings slowed in the third quarter amid market turmoil, the exchange said. A total of 22 companies were newly listed on the exchange in the three- month period, including transfers from the Growth Enterprise Market, compared with 28 a year earlier, according to the statement.

‘Risks, Uncertainties’

“Looking ahead, Hong Kong’s financial markets are still exposed to a number of risks and uncertainties due to global financial issues,” Chairman Ronald Arculli said in the statement. “Asia’s economies are more likely to weather any further deterioration better than their Western counterparts.”

The exchange said in August it may develop indexes and derivatives with the Shanghai and Shenzhen bourses. Li Keqiang, the front-runner to replace Wen Jiabao as China’s premier in 2013, said on Aug. 17 that China will start an exchange-traded fund linked to Hong Kong stocks and expand sales of yuan bonds in the city. No agreements have been signed, Hong Kong Exchanges said today in the statement.

In the third quarter, the daily average value of shares traded in the city gained 17 percent to HK$72.6 billion from HK$61.8 billion in the same period of 2010, the company said. Listing fees in the nine months through Sept. 30 brought in HK$714 million, according to the exchange’s income statement. That compares with the HK$657 million a year earlier.

Falling IPOs

IPOs in Hong Kong, which boosted earnings from listing fees last year, fell to $18.6 billion in the nine months through September, compared with $22.3 billion a year earlier, according to data compiled by Bloomberg. Agricultural Bank of China Ltd. used Hong Kong last year to conducted part of 2010’s biggest IPO.

The bourse has more than 100 applications in process, Chairman Ron Arculli said on Oct. 25. Some are holding back because of the volatility in the equity markets, he said. The Hang Seng Index tumbled 21 percent last quarter, the biggest quarterly decline since the three months ended September 2001, when terrorist attacks in the U.S. sent global markets tumbling.

The exchange established a review committee to examine security plans after its public news website was hacked, it said. The city’s bourse was forced to find new ways of publicizing earnings and other corporate events after hackers jammed its news website on Aug. 11.

--Editors: Stan James, John McCluskey

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

To contact the editor responsible for this story: John McCluskey at j.mccluskey@bloomberg.net


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