HKEX profits hit by weaker first half trading

HKEX profits hit by weaker first half trading

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Subdued trading activity weakened Hong Kong Exchanges and Clearing’s (HKEX) earnings in the first half of 2016.

Revenue for the stock market operator and post-trade specialist slumped 18% compared to the first six months of last year while EBITDA fell by 25%.

Fees from the cash market in Hong Kong declined while trading activity slowed on the London Metal Exchange, which HKEX acquired in 2012.

“During the first half of 2016, our markets experienced downward pressure on trading activity,” said a company statement on Wednesday

“Considerable uncertainty surrounding the UK’s EU referendum (Brexit) also intensified market volatility and dampened market activity.”

Lower trading and clearing income was mitigated somewhat by an increase in activity on the futures exchange, where volatility boosted average daily volumes by 34%.

In recent years the Hong Kong group has focused on building renminbi product suite to support the currency’s internationalisation and capitalise on China’s integration with the world’s other markets.

However revenue from the Stock Connect programme, a cross-boundary investment channel that connects the Shanghai Stock Exchange and the Hong Kong Stock Exchange, slumped in the second half of 2016 due to weaker volumes.

Income from Stock Connect totalled  $71m in the first six months of 2016  compared to $115m in the first half of 2015.

HSBC analyst York Pun said in a research note that he expected the launch of the Hong Kong – Shenzhen Stock Connect in coming months to boost turnover.

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