Hong Kong bourse logs first profit rise in three quarters, IPOs pick up

By Selena Li

HONG KONG (Reuters) -Hong Kong's bourse has booked its first profit increase in three quarters, marking record revenue and income for an April-June period as new listings and trading activity picked up.

Net income for Hong Kong Exchanges and Clearing (HKEX) climbed 9% from a year earlier to HK$3.16 billion ($405 million) while revenue rose 7%.

The bourse said it had benefited from increases in trading and clearing fees as volumes across the cash, derivatives and commodities markets grew.

HKEX has been beset with challenges over the past few years, from Beijing's regulatory crackdown on many industries to rising tensions between China and the United States, and Chinese economy's lacklustre growth - all of which have contributed to widespread disaffection with Chinese assets.

The exchange's stock price is down some 15% so far this year and was 1% lower after the results as investors noted the strong second quarter came after a particularly weak one.

However, new Chief Executive Bonnie Chan said sentiment appeared to be improving.

"Looking ahead, while macro-environment uncertainties persist, we remain cautiously optimistic about the outlook for the rest of the year," she said in a statement.

IPO activity which suffered in the first quarter during a sharp sell-off in Chinese stocks is now showing "signs of warming", said Chan, who took the helm in March.

"The recent pickup of momentum, especially in the second quarter, has shown us that investors around the world continue to be very focused on the China story, the China growth story," Chan told reporters on Wednesday.

"So that fundamental feature is not going away."

Efforts by mainland Chinese authorities to expedite approvals of initial public offerings also helped, though deal values have been relatively small, all under $500 million.

Eighteen firms went public in Hong Kong during the second quarter compared to 12 in the first quarter, raising about 80% more in funds.

But some IPO plans have yet to materialise. An initiative to encourage more specialist technology companies to list has attracted just two firms since new rules were introduced a year ago.

Chan said the bourse has "done extremely well" with sizable follow-on offerings, particularly a record $20 billion in convertible bonds issuance by large Chinese firms such as Alibaba Group and Ping An Insurance. They raised $5 billion and $3.5 billion, respectively, in May and July.

The exchange has also trying to enhance its derivative offerings, announcing in April a major investment to develop its in-house derivatives platform.

($1 = 7.7906 Hong Kong dollars)

(Reporting by Selena Li; Editing by Edwina Gibbs and Tomasz Janowski)