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HKEx profit slides on weak trading volumes

By Michelle Price HONG KONG (Reuters) - (Reuters) Hong Kong's stock exchange operator said on Monday its 2016 net profit fell 27% due to a decline in fees generated by stocks and metals trading on the bourse as it struggled to match stellar volumes seen during 2015's record rally. Hong Kong Exchanges and Clearing reported a net profit of HK$5.8bn (US$747.36m) for 2016, slightly below analysts' average estimate of HK$6bn, according to Thomson Reuters data. "The global financial markets were volatile and overshadowed by political and economic uncertainties. At home, there were concerns that mainland China’s economy was slowing down and that interest rates would rise. All these contributed to cautious sentiment among investors and created a challenging market environment for the Group," HKEX said in a statement. Average daily trading on the bourse in 2016 fell 37% to HK$70bn compared with the previous year. Group profits were also dented by the bourse's London Metal Exchange subsidiary, which saw trading volumes fall 8% year on year due to subdued metals demand causing commodities-related revenues to decline 10% to HK$1.6bn. Stocks trading volumes struggled to match the records seen in 2015, when a dramatic first-half rally on the mainland drove frantic activity on the Hong Kong bourse. The exchange cautioned that the operating environment for financial markets is expected to remain challenging and volatile this year due to "many political and economic uncertainties". HKEX chief executive Charles Li has banked on deepening the bourse's ties with mainland China to sustain profit growth. The bourse said on Monday it would continue to broaden its connectivity schemes with the mainland. The exchange's shares have risen around 8% this year, compared to a 9% year-to-date rally in the main Hang Seng benchmark. (Reporting by Michelle Price; Editing by Muralikumar Anantharaman)