(Updates with LME sales in 12th paragraph.)
Feb. 27 (Bloomberg) -- Hong Kong Exchanges & Clearing Ltd. missed earnings estimates, posting the lowest quarterly profit since the global financial crisis as turnover and listings fell at the world’s largest exchange operator by market value.
Net income fell 32 percent to HK$864 million ($111 million) for the three months ended Dec. 31, from HK$1.27 billion a year earlier, according to figures derived from the company’s full- year statement. That compares with the average HK$1.11 billion estimate of 3 analysts surveyed by Bloomberg News. The result was the worst since the first quarter of 2009.
Global equity volumes plunged last year, squeezing exchanges as slowing growth in China and the U.S., plus Europe’s sovereign-debt crisis, sapped investor confidence. Hong Kong Exchanges bought the London Metal Exchange for $2.2 billion in December as Chief Executive Charles Li seeks to transform the bourse into a comprehensive exchange dealing in equities, commodities, fixed income and foreign exchange products and their derivatives.
“Investors are now watching closely the LME development to see if it will have a positive impact on the stock exchange,” said Ben Kwong, chief operating officer at brokerage KGI Asia Ltd. in Hong Kong. The stock is likely to trade between HK$130 and HK$150 “until there’s a fresh catalyst for earnings. It all depends on market activity in the coming months.”
Shares of Hong Kong Exchanges were unchanged at HK$137.80, with the stock gaining 4.5 percent this year as improving economic reports from China and the U.S. fueled increased market activity.
For the full year, net income fell 20 percent to HK$4.08 billion, or HK$3.74 a share, from HK$5.09 billion, or HK$4.70 a share, a year earlier, the company said in a statement today. That compares with the average HK$4.29 billion estimate of 20 analysts surveyed by Bloomberg News.
Average daily turnover value on the exchange was HK$53.9 billion, a drop of 23 percent from the previous year, the bourse operator said. Sales fell 8.2 percent last year. Funds raised through initial public offerings on the main board plunged 66 percent to HK$89 billion in 2012 from a year earlier.
The exchange, which raised $1.5 billion selling stock and debt to fund the LME purchase, said it doesn’t plan further fund raising.
Singapore Exchange, operator of Southeast Asia’s biggest stock market, last month reported a 17 percent gain in second- quarter profit, while Japan Exchange Group Inc., created by the merger of the nation’s two biggest bourses said it is willing to pursue an alliance or merger.
Hong Kong’s stock market climbed last quarter, buoyed by foreign inflows after the U.S. Federal Reserve began a third round of asset purchase in September.
The city’s exchange this year may also benefit from Chinese companies converting their shares listed in the mainland into Hong Kong-traded stock.
China Vanke Co., the country’s biggest publicly traded developer, said this month that shareholders approved a plan to convert its Shenzhen-listed B shares into Hong Kong-listed shares. Livzon Pharmaceutical Group Inc. also said last month it will convert its B shares, while Securities Times reported Shanghai Diesel Engine Co. is considering the conversion.
London Metal Exchange’s sales rose to HK$976 million in 2012 from HK$764 million a year earlier. Revenue would have been HK$1.14 billion if a fee that started July 2 was applied for the year, Hong Kong Exchanges said in a presentation.
The city’s bourse gained HK$51 million from trading fees on the LME, partly offsetting decline elsewhere, it said.
LME’s share of global base-metal futures rose to 83 percent last year from 80 percent in 2011, with gains in zinc and aluminum, it said. The LME handles more than 80 percent of world trade in industrial-metal futures.
Hong Kong Exchanges may expand the LME into trading iron ore, freight, coking coal and even agricultural products including rubber, as part of the next stage of growth, CEO Li said in October.
“Our acquisition of the LME Group was a significant milestone,” Chairman Chow Chung Kong said in the statement. “It has given us new capabilities and positioned us to broaden our ties with the mainland of China.”
Hong Kong Exchanges declared a final dividend of HK$1.46 a share, a share, down from HK$2.09 in 2011.
Operating expenses rose 13 percent to HK$1.96 billion from the previous year, it said.
--With assistance from Eleni Himaras in Hong Kong and Agnieszka Troszkiewicz in London. Editors: Nick Gentle, Tan Hwee Ann