by winston » Wed May 14, 2008 8:35 am
RPT-PREVIEW-HKEx to post strong Q1, but 2008 outlook dim
By Joseph Chaney HONG KONG, May 9 (Reuters) - Hong Kong Exchanges and Clearing Ltd <0388.HK> should post a strong rise in first-quarter profit, but Asia's largest listed bourse faces an uncertain 2008 as China's turbulent markets and fears of a U.S. recession weigh.
Hong Kong, the primary market for many of China's corporate titans, has seen a slowdown in new lisings, with 10 companies withdrawing or postponing a combined $7.68 billion worth of IPOs so far this year.
But turnover is rising due to sustained investor interest in China's booming economy.
Listing fees account for less than 20 percent of HKEx's revenue, but the IPOs of the past two years have boosted Hong Kong's main board market value to roughly HK$16.8 trillion ($2.1 trillion), as of end-March, up over 25 percent from the same period last year.
"The overall market activity is still hot," said Benny Yu, an analyst at VC Brokerage.
"The key reason is that last year so many Chinese enterprises listed in Hong Kong which increased the total number of shares, and the market cap increased faster than anywhere in the world," Yu added. "International investors are allocating more resources to the market over time."
Hong Kong Exchanges and Clearing Ltd (HKEx) is expected to report on Wednesday that first-quarter net profit rose 56-84 percent to HK$1.44-HK$1.7 billion ($184.8-$218.1 million), according to two analyst forecasts.
Regional rival ASX Ltd , the Australian stock exchange, said its earnings in the fiscal first half ended in December rose 35 percent on record trading volumes, while Singapore Exchange's first-quarter profit was its smallest in four quarters.
TURNOVER UP, SHARES DOWN Despite HKEx's earnings growth, daily turnover in Hong Kong fell 26.6 percent from the previous quarter to average HK$98.4 billion ($12.6 billion) in the first quarter, as investors grew anxious about the fallout from a U.S. recession and China's benchmark Shanghai index <.SSEC> slumped by a third.
The Hang Seng Index <.HSI> tumbled 18 percent in the quarter, while HKEx's shares slide 40 percent.
HKEx is trading at 24.6 times forward earnings, compared with ASX's 16.5 times multiple and SGX's roughly 21 times.
Yu said turnover levels probably peaked in the fourth quarter of last year, and he expected HKEx to post an annual drop in profits of up to 7 percent.
HKEx plans to expand its offerings to protect its growth rate, initiating trading in new asset classes including carbon emissions, gold futures, and depositary receipts.
And HKEx officials are scouring the globe for new listings, taking 30 trips last year to countries including Japan, Malaysia, Taiwan, Vietnam, India, Kazakhstan, Russia, Mongolia and the United States.
It also wants to lure sovereign wealth funds to the city, Ronald Arculli, chairman of Hong Kong Exchanges and Clearing, told Reuters this month.
Last year, Chinese officials killed any immediate hopes of a boost from a proposed landmark programme to let mainland citizens invest directly in Hong Kong securities.
Officials said China needed new laws to regulate the outflow of funds, and a timeline for the scheme had yet to be set.
It's all about "how much you made when you were right" & "how little you lost when you were wrong"