Hong Kong bourse operator 2019 profit up, coronavirus renews uncertainty

By Alun John

HONG KONG (Reuters) - Hong Kong Exchanges and Clearing Ltd (HKEX) <0388.HK> warned the coronavirus outbreak had brought renewed uncertainty to its business, as it shrugged off political turmoil at home and abroad to post a small rise in annual profit on Wednesday.

A good market for initial public offerings and strong revenue from Stock Connect, which links the Hong Kong and Shanghai and Shenzhen exchanges, made up for a decline in trading volumes.

HKEX's full-year net profit came in at HK$9.39 billion ($1.21 billion), up from HK$9.31 billion a year earlier, but missed an average estimate of HK$9.49 billion of analysts polled by Refinitiv.

"With a phase one trade deal between China and the U.S., there are signs of recovery in investor confidence, although the current COVID-19 outbreak brings renewed uncertainty," HKEX said in a statement to the Hong Kong Stock Exchange, its subsidiary.

Amid political protests in Hong Kong, and the trade war, trading volumes dropped sharply in 2019, with the average daily turnover of equity products falling 18% in value compared with the year before.

Turnover did receive a boost from the listing of Alibaba <9988.HK> later in the year, however. Daily trading in the technology giant's shares averaged HK$3.7 billion between its November 26 listing and the end of the year, nearly 5% of the HK$75.8 billion average daily securities trading on the bourse in December. The bourse had good year for capital raisings, notably, Budwieser Asia's <1876.HK> $5.75 billion IPO, as well as Alibaba's $12.9 billion listing. Hong Kong ranked third globally for IPOs last year, after the Nasdaq and the Saudi Exchange, raising $25 billion excluding Alibaba's secondary listing, according to Refinitiv data.

Mainland investors cannot trade Alibaba's shares via the stock connect scheme, as it excludes companies that have both secondary listings and shares with different voting rights - or similar arrangements as Alibaba does.

HKEX Chief Executive Charles Li said on a call with journalists later on Wednesday that it was "a matter of when not if," such companies would be included.

"Obviously our partners in China have their own priorities and we will find the right moment to reach a consensus," he said.

HKEX hopes to attract secondary listings from other overseas-listed Chinese companies, some of which are not structured along "one share one vote" lines.

In 2019, HKEX also stunned investors with an audacious but ultimately unsuccessful bid to purchase the London Stock Exchange Group.

The Hong Kong bourse said on Wednesday that "HKEX was unable to engage with the management of LSEG in realising its vision."

Li told the media that HKEX's strategic plan still "included a component of building out our international footprint."

"When the right opportunity arises, we will take it."

(Reporting by Alun John, additional reporting by Sumeet Chatterjee; Editing by Lincoln Feast and David Evans)