Hong Kong Exchanges & Clearing Ltd Chief Executive Officer Charles Li (center) is joined by other senior executives of the company at Wednesday's press conference in Hong Kong. Li said the proposed trading hour extension can enhance the long-term competitiveness of the local bourse when it is aligned with its mainland counterparts. Oswald Chen / China Daily

Bourse operator records modest growth of 3.2% in H1 net profit

Hong Kong Exchanges and Clearing Ltd (HKEx), the city's sole bourse operator, posted a mild 3.2 percent year-to-year increase in net profit for the six months ended June to HK$2.26 billion. However, net profit for the second quarter alone dropped 16.4 percent to HK$1.13 billion after higher volatility curbed trading activities.

The company declared an interim dividend of HK$1.89 per share, up 2.7 percent from a year ago.

Revenue from daily trading, clearing and custody businesses rose 9.3 percent to HK$3.30 billion. Total turnover, however, grew by a much smaller 3.4 percent to HK$3.45 billion as net investment income plunged 51.3 percent to HK$158 million.

During the period, operating expenses rose only by a modest 2 percent to HK$776 million.

The HKEx blamed heightened market volatility for a drop in the local bourse's average daily turnover (ADT), which capped the operator's revenue growth.

According to the HKEx, the ADT for the first six months rose only 9.4 percent from a year ago to HK$63.8 billion. However, the ADT for the second quarter alone dropped 12.3 percent to HK$62.9 billion as investors became more cautious with their trading.

At end-June, the total market capitalization of the Main Board and the Growth Enterprise Market (GEM) reached HK$17.13 trillion.

In the initial public offering front, the HKEx attracted 30 new listings during the period, raising new capital of HK$168 billion.

Looking ahead, the HKEx envisions that the proposed extension of trading hours could boost the bourse operator's long-term competitiveness and its revenue.

Charles Li, the chief executive of the HKEx, disclosed in the interim result press conference that the HKEx management has decided to consult market participants on plans to extend daily trading hours to 5.5 hours from 4 hours currently.

"If we can realign the trading hours of the local market to those of the mainland, we can synchronize the trading hours with the mainland counterparts. This can enhance the daily turnover of the local market and can bring intangible value for the HKEx," Li stressed.

"Moreover, if mainland investors are allowed to sell or buy local stocks directly in the local stock market, then the issue of trading-hour extension will be more relevant as the synchronization of the trading hours will create enormous investment opportunities for them," Li said.

The internationalization of the yuan also represents tremendous potential for the HKEx to grow its business, he said.

"Hong Kong no doubt will be the offshore yuan financial center as the city is entrusted by the mainland (authority) to conduct offshore yuan businesses. However, the development of full-fledged yuan-denominated financial products in the city still has a long way to go because the issue of free capital flows on the mainland has not yet resolved for the moment," Li said.

China Daily

(HK Edition 08/12/2010 page4)