Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue and other income increased by 8% year on year and 4% quarter on quarter in Q2 2024.
- Profit attributable to shareholders rose by 9% year on year and 6% quarter on quarter in the same period.
- Record high half-yearly average daily volume of 1.5 million derivatives contracts, up 12% year on year.
- LME average daily volumes in Q2 hit a 10-year high, with volumes up 29% compared to last year.
- Strong performance in the ETP market, with average daily turnover up 4% year on year.
Negative Points
- Cash Market volumes for the first half were down 4% compared to a year earlier.
- Revenue and other income for the first half of 2024 were comparable to the first half of last year, indicating limited growth.
- Operating expenses increased by 7%, reflecting higher investments in talent and infrastructure.
- Net investment income was 6% lower than the first half of last year due to lower margin fund size.
- Profit after tax for the first half of 2024 was down 3% compared to the first half of last year.
Q & A Highlights
Q: With reference to the CSRC announcement, one of the initiatives is to support the southbound Stock Connect for RMB-denominated stocks. Should we expect this to progress within the rest of 2024?
A: We are seeing very encouraging uptake in terms of southbound flow. The introduction of the southbound RMB counter will make it easier for Mainland investors to take advantage of the Stock Connect and invest in Hong Kong listed securities. We are working closely with our Mainland counterparties to get the execution going, and we are making very good progress on it.
Q: Onshore Asia market average daily turnover has declined materially in the recent 1.5 months. What's your interpretation of this change, and how might it impact HKEX revenue?
A: It's difficult to speculate on the reasons for the recent volume decline. However, the uptick in southbound flow has stayed very solid. Mainland investors are taking advantage of the Stock Connect platform to invest in high-yielding Hong Kong stocks. We will continue to focus on improving our Connect franchise to provide a convenient and effective venue for Mainland investors.
Q: Are there any new initiatives or efforts in the pipeline to drive derivatives growth over the next couple of years?
A: We are very encouraged by the progress in our derivatives market, which remains a strategic focus. We have a diverse product universe, including Hang Seng TECH Futures and Options, MSCI China A50 Connect, and RMB currency futures. We will continue to focus on investor appetite and demand for diversification and risk management products.
Q: Any new initiatives with CSRC and other policymakers to support southbound trading?
A: We are continuously expanding the Connect franchise, including the inclusion of more products and enhancements to the trading structure. We are also exploring the possibility of relaxing investor eligibility criteria to bring more retail and other types of investors from the Mainland into southbound trading.
Q: How should we think about the volume and revenue impact of the tick size change?
A: We believe that reducing the spreads in a thoughtful manner should drive up liquidity and lower overall transaction costs. The consultation period is still open, and we have received broadly supportive feedback. We will analyze the market feedback and keep the market informed.
Q: How are the shifts in program trading rules impacting volumes, especially for northbound?
A: The final implementation rules have yet to be announced by the Mainland exchanges. For the Stock Connect platform, we follow the home market rules. It's too early to assess the impact, but we will keep the market informed as developments occur.
Q: What is the sustainability of the ADT trends that we saw in Q2?
A: The market vibrancy can return swiftly when conditions are present. While global markets are experiencing headwinds, the current activity demonstrates strong interest among global investors in the Hong Kong market. Follow-on fundraising activities by Hong Kong-listed companies also indicate healthy investor interest.
Q: Any guidance on cost growth?
A: We manage costs over a longer-term trend rather than any single quarter. Our focus will continue to be on talent and IT infrastructure to deliver on our strategic initiatives. Our cost discipline has been strong, with an attractive EBITDA margin above many of our peers.
Q: Can you provide more details on the weekly options for the Hang Seng TECH index?
A: We detected a trend of investors asking for shorter-dated options and launched weekly options to meet this demand. It's still early to determine the sustained volume, but we will keep an eye on investor interest and share more data points as the product develops.
Q: What is the status of the southbound RMB counter?
A: The southbound RMB counter was one of the five measures announced by the CSRC in April. We are in the execution phase, working on system enhancements with our Mainland counterparties. We will keep the market informed as we reach new milestones.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
