The local stock market operator, Hong Kong Exchanges and Clearing Limited (HKEx), said in a trading update Wednesday that its net profit of the first quarter of 2010 surged 35 percent to HK$1.127 billion based on a year-on-year (YoY) basis while revenues jumped 31.6 percent year-on-year.

HKEx cited the burgeoning transactions within the cash and derivatives markets and the revival of the initial public offering (IPO) market as the main engines for creating this profit growth of the company.

However, HKEx will remain vigilant, as the global economies still face uncertainties on the bumpy road to global economic recovery.

HKEx said that the strong performance of the cash and derivatives markets helped foster profit growth because the company can earn more commission income from these transactions. Average daily turnover value on the local bourse amounted to HK$64.8 billion, up 45 percent from a year ago.

Concerning the IPO business segment, HKEx said that in the first quarter of 2010, thirteen companies have been newly listed on the Main Board. Total capital raised from these IPOs amounted to HK$87.1 billion, representing a 5-fold increase over the first quarter of 2009.

HKEx cautioned that as the global economies are recuperating at varying speeds, governments and central banks around the globe will plan their stimulus-measures exit strategies prudently. Because their decisions will exert different impacts upon the world financial markets, HKEx will remain alert to the future development of the global financial markets.

Despite the future challenges, the stock operator was upbeat over its future competitiveness, since it can leverage Hong Kong's unique position as a gateway to China and established position as an international financial center.

HKEx said that it will continue to foster close cooperation with the mainland exchanges in various areas to enhance mutual developments for exchange bourses in both areas.

The market operator also noted that it welcomes the administration's proposals to reduce trading costs of some financial products listed on the Hong Kong Stock Exchange, because this can strengthen the competitiveness of HKEx in attracting more businesses.

However, there is some speculation that profit growth of HKEx in the second half of 2010 may slow down.

"First, the profit surge of HKEx in the last quarter might be inflated, because the profit level in the first quarter of 2009 was so low, due to the fragile status of the global financial markets; second, if the markets face downside risks due to the European debt crisis, mainland tightening policies and the bumpy economic recovery in the US, market turnover will be significantly reduced, which will slow down profit growth of the bourse operator," Dickie Wong, research manager of the Kingston Security told China Daily.

China Daily

(HK Edition 05/13/2010 page2)