HKEX Reports Better-Than-Expected First Quarter Earnings

Hong Kong Stock Exchange
Tourists take selfies at the Peak in Hong Kong (Photo: Reuters)

Hong Kong's stock exchange operator reported stellar first-quarter earnings thanks to an influx of cross-border trading and investment income. Hong Kong Exchanges and Clearing (HKEX) credited its great first quarter performance to the continued interest of global investors in the Chinese market.

The operator, which runs Asia's third-largest stock market, announced this week that it saw a good amount of increase in its overall net profits. The firm's net profits increased to $332 million for the first quarter, a 2 percent increase when compared to the same quarter last year. The numbers beat initial analyst expectations for the quarter, which predicted a 6 percent decline amidst the slowing economic growth and the ongoing trade negotiations between China and the United States.

According to the analysts, HKEX's reported results are way better than expected. However, the firm's base turnover volume is still quite high and it may negatively affect its earnings moving forward. Despite its turnover volume and a 30 percent decline in its average daily turnover, the firm still managed to beat initial forecasts.

Thanks to the implementation of its cross-border Stock Connect program, HKEX was able to increase its overall revenues by as much as 3 percent. The program netted the company a record income of $29.56 million, which drove its revenues to $550 million. Northbound trading through the program reached its highest quarterly level to around $11 billion. Apart from the program, the firm also benefited from the global index compiler MSCI's decision to prioritize China's A Shares in global indices.  

Income from investments also saw significant increases by about 27 percent, reaching $47.40 million. This was partly thanks to a strong rally in the city's stock market, despite a 31 percent drop in trading and clearing fees. The drop in fees was also offset by China's slew of economic stimulus policies, which initially started the rally in China and Hong Kong's markets. This resulted in the rapid increase in various indices, including the Shanghai Composite Index with a 23 percent increase in the first quarter and the Hang Seng Index with its 12 percent gain.

HKEX also experience a number of successful initial public offerings (IPOs). This included the recent $6.9 billion China Tower IPO, which is currently the world's largest mobile telecom tower operator. The stock exchange operator expects its momentum to continue in the next quarters as new cutting-edge tech companies go public. The firm expects companies that deal with technologies such as cloud computing and blockchain to attract more investors in the coming months.

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