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Hong Kong bourse logs biggest quarterly profit fall in 3 years on protests

By Alun John and Sumeet Chatterjee
FILE PHOTO: The Hong Kong Exchanges and Clearing Limited logo is displayed at its entrance in Hong Kong
FILE PHOTO: The Hong Kong Exchanges and Clearing Limited logo is displayed at its entrance in Hong Kong

By Alun John and Sumeet Chatterjee

HONG KONG (Reuters) - Hong Kong's stock exchange operator said quarterly profit dropped 8%, the steepest slide in nearly three years, as investor sentiment was hit by months of political unrest that pushed the Asian financial hub into recession.

Also citing the U.S.-China trade war and uncertainty over Brexit, the Hong Kong Exchanges and Clearing Ltd (HKEX) <0388.HK> said profit tumbled to HK$2.2 billion ($281 million) in the third quarter from the same period a year earlier.

Revenue fell 6% to HK$3.3 billion.

Trading fees, which make up the largest chunk of the bourse's revenue, skidded 10% to HK$1.4 billion as the average daily turnover of securities plunged 19% from the preceding quarter and 16% from the same period a year earlier. Stock listing fees dropped 13.6% to HK$394 million.

Hong Kong's Hang Seng index <.HSI> declined 8.6% during the quarter to end-September, marking its worst quarter in four years. Shares in the bourse fell even more, losing 16.5% during the quarter.

While Hong Kong's pro-democracy protests show no signs of abating, the exchange's earnings could be bolstered by a pick up in IPOs in the fourth quarter.

E-commerce giant Alibaba Group Holding Ltd <BABA.N> is looking at a listing in Hong Kong as early as November which may raise up to $15 billion, sources have said.

The Hong Kong exchange launched a surprise $39 billion approach for the London Stock Exchange Group <LSE.L> in September, but withdrew it after failing to convince LSE management and investors to back the move.

Analysts expect the bourse will refocus its efforts on expanding links with mainland China.

"We were disappointed not to proceed with a firm offer for LSEG, but we remain resolutely focused on the successful execution of our three-year strategic plan, maintaining good cost discipline and capturing future growth opportunities," Charles Li, the bourse's CEO, said in a statement on Wednesday.

A total of $18.5 billion was raised by companies via IPOs on the Hong Kong bourse from January through to mid-October, compared with $21.9 billion raised on the NYSE and $23.3 billion on Nasdaq, Refinitiv data showed.

(Reporting by Alun John and Sumeet Chatterjee; Editing by Edwina Gibbs)