Hong Kong Exchanges and Clearing (388) Q2 2024 earnings summary

Executive summary

• Achieved record Q2 2024 revenue of HK$5.4b, up 8% YoY and 4% QoQ, with 1H 2024 revenue stable at HK$10.6b; profit attributable to shareholders rose 9% YoY in Q2 to HK$3.2b, but 1H profit dipped 3% YoY to HK$6.1b.

• Robust derivatives and commodities trading volumes, with LME chargeable ADV up 29% YoY and derivatives ADV up 12% YoY in 1H 2024.

• IPO market rebounded in Q2, with a 50% QoQ increase in new listings and a 79% rise in IPO funds raised.

• Strategic initiatives included enhancements to Swap Connect, ETF eligibility relaxation, new product launches, and technology platform development such as the Orion Derivatives Platform.

• Market structure enhancements, new ESG disclosure requirements, and a new treasury share regime were implemented.

Financial highlights

• Q2 2024 core business revenue reached HK$5.0b, up 7% YoY; 1H 2024 core revenue flat YoY at HK$9.7b.

• Q2 2024 EBITDA was HK$4.0b, up 18% YoY; 1H 2024 EBITDA at HK$7.7b, down 3% YoY; EBITDA margin for 1H 2024 was 73%, down 2 percentage points YoY.

• Q2 2024 EPS was HK$2.49, up 19% YoY; 1H 2024 EPS at HK$4.84, down 3% YoY.

• Operating expenses for 1H 2024 increased 7% YoY, mainly due to staff and IT costs, partly offset by legal fee recoveries.

• Net investment income for 1H 2024 was HK$2,521m, down from HK$2,676m in 1H 2023, mainly due to lower Margin Fund size; Corporate Funds net investment income rose 10% YoY to $901m.

Outlook and guidance

• Management remains cautiously optimistic for the rest of 2024, focusing on market vibrancy, resilience, and competitiveness amid ongoing macro uncertainties.

• Continued product expansion, infrastructure upgrades, and international partnerships are expected to drive future growth.

• Derivatives market expected to remain robust, with new products and strong currency futures driving growth.

• Connect programmes and LME volumes anticipated to provide positive momentum.

• Internally managed investment income expected to decline in 2H 2024/2025 with potential rate cuts.