Hong Kong Exchanges and Clearing : HKEX 2022 Final Result

Pursuant to Chapter 38 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, the Securities and Futures Commission regulates Hong Kong Exchanges and Clearing Limited in relation to the listing of its shares on The Stock Exchange of Hong Kong Limited. The Securities and Futures Commission takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness, and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

(Incorporated in Hong Kong with limited liability) (Stock Code: 388)

(Financial figures in this announcement are expressed in Hong Kong dollar (HKD) unless otherwise stated)

2022 FINAL RESULTS,

DIVIDEND AND CLOSURE OF REGISTER OF MEMBERS

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STRATEGIC AND FINANCIAL HIGHLIGHTS

Nicolas Aguzin, Chief Executive Officer said:

"Throughout 2022, HKEX demonstrated focus and resilience, launching a range of important strategic initiatives and introducing a range of new products and market enhancements. These included the most significant developments to our mutual-market access Connect franchise since it was first established, the launch of Core Climate - Hong Kong's first carbon trading platform, and the introduction of a host of new Derivatives and ETF products. And despite the challenging global economic and geopolitical backdrop, HKEX remained one of the world's premier capital raising venues, with positive sentiment returning to the IPO market in the second half, culminating in a total of 90 new companies from a range of sectors and geographies successfully joining our markets in 2022. HKEX Derivatives Market also had another record year, with Hong Kong fast becoming the region's key risk management centre. The year finished very strongly for HKEX, with the Group reporting record fourth quarter financials, offsetting in part the softer volumes and numbers in the first half. Whilst the road ahead will not be without challenges, we are excited about the year ahead and we look forward to continuing to execute on our vision to build the Marketplace of the Future."

Strategic & Operational Highlights

Corporate
12 Jan	New strategic cooperation agreement signed with Shenzhen Stock Exchange
29 Mar	HKEX Corporate Day
21 Jun	HKEX Connect Hall grand re-opening
Regulation
1 Jan	Listing Rules amendments for overseas issuers came into effect
29 Apr	Board Diversity & Inclusion in Focus Repository launched
19 Oct	Consultation paper on Listing Regime for Specialist Technology Companies published
Products and Services
21 Feb	First metaverse-themed ETF listed
24 Feb	First pure-play Hong Kong equity ESG ETF listed
18 Mar	First Special Purpose Acquisition Company listed
23 Mar	First carbon futures ETF listed
29 Apr	QME launched new soybean contracts
19 May	First Hong Kong Government retail green bond listed
24 May	LME launched a range of new sustainability certifications on LMEpassport
23 Jun	First blockchain ETF listed
4 Jul	Inclusion of ETFs in Stock Connect
4 Jul	Swap Connect, a new mutual access programme between Hong Kong and Mainland China's interbank interest rate
	swap markets announced
7 Jul	IR Connect launched
8 Aug	MSCI China A 50 Connect Index Derivatives Warrants listed, Hong Kong's first A-share structured products
28 Oct	Core Climate launched, Hong Kong's first carbon trading platform
31 Oct	Fit-out of a new Hosting Services data hall completed
28 Nov	Hang Seng TECH Index Futures Options launched
16 Dec	First two crypto asset ETFs launched
Market Operations
25 Apr	Electronic Communication Platform upgraded, enabling clients to exchange files with HKEX
3 May	Volatility Control Mechanism expanded to cover Exchange Traded Products
9 May	Derivatives Holiday Trading commenced
13 Jun	New Value-at-Risk (VaR) Platform launched in the Cash Market
12 Aug	Stock Connect trading calendar enhancements announced, facilitating trading on all days where both the Hong Kong
	and Mainland markets are open
17 Oct	Volatility Control Mechanism and Dynamic Price Banding Mechanism expanded to cover Hang Seng TECH Index
	Futures
21 Nov	T Session closing hour revised for selected futures and options contracts to support investors capturing underlying
	market movements in the same trading session
13 Dec	New HKD-RMB Dual Counter Model plan announced, together with Dual Counter Market Making Programme in the
	Cash Market
19 Dec	The SFC and the CSRC announced in-principle agreement on expansion of eligible stocks included in Stock Connect
Corporate Social Responsibility and ESG
24 Mar	MOU signed with Guangzhou-based China Emissions Exchange to explore Greater Bay Area and international
	carbon opportunities
31 Mar	2022 HKEX Impact Funding Scheme launched
16 May	2022 HKEX Charity Partnership Programme launched
22 Jun	New HKEX Research Funding Scheme launched
5 Jul	Hong Kong International Carbon Market Council launched
24 Oct	LME confirmed 2040 net-zero commitments
2 Dec	Inaugural HKEX Impact Summit
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Annual Results

Financial Highlights

• 2022 revenue and other income of $18,456 million was 12 per cent lower than the record 2021
• • Core business revenue was down 9 per cent against 2021, reflecting reduced trading and clearing fees from lower Headline ADT and Stock Connect Northbound ADT, and lower depository fees and listing fees. This was partly offset by the increase in net investment income from Margin Funds and higher trading fees from the Derivatives Market
  • Net investment loss on Corporate Funds was $48 million (2021: income of $708 million), as the External Portfolio had
    net fair value losses of $486 million in 2022 (2021: gains of $364 million), partly offset by higher investment income from internally-managed Corporate Funds
• Operating expenses were 12 per cent higher than 2021, attributable to higher staff costs and professional fees
• EBITDA1 was 19 per cent lower than 2021 at $13,185 million, with EBITDA margin at 72 per cent, 6 per cent lower than 2021
• Profit attributable to shareholders was $10,078 million, 20 per cent lower than the record 2021

Key Financials

	2022	2021
	$m	$m	Change
Revenue and other income
Core business revenue	18,374	20,103	(9%)
HKEX Foundation donation income	130	139	(6%)
Net investment (loss)/income of Corporate Funds	(48)	708	N/A
	18,456	20,950	(12%)
Operating expenses	5,095	4,529	12%
EBITDA	13,185	16,269	(19%)
Profit attributable to shareholders	10,078	12,535	(20%)
Capital expenditure	1,184	1,127	5%
Basic earnings per share	$7.96	$9.91	(20%)
First interim dividend per share	$3.45	$4.69	(26%)
Second interim dividend per share	$3.69	$4.18	(12%)
	$7.14	$8.87	(20%)
Dividend payout ratio	90%	90%	-

Key Market Statistics

	2022	2021	Change
ADT of equity products traded on the Stock Exchange 1 ($bn)	109.0	146.6	(26%)
ADT of DWs, CBBCs and warrants traded on the Stock Exchange ($bn)	15.9	20.1	(21%)
ADT traded on the Stock Exchange 1,2 (Headline ADT) ($bn)	124.9	166.7	(25%)
ADT of Northbound Trading of Stock Connect 1 (RMBbn)	100.4	120.1	(16%)
ADT of Southbound Trading of Stock Connect 1 ($bn)	31.7	41.7	(24%)
ADV of derivatives contracts traded on the Futures Exchange
('000 contracts)	7154	538	33%
ADV of stock options contracts traded on the Stock Exchange
('000 contracts)	588	637	(8%)
Chargeable ADV 3 of metals contracts traded on the LME ('000 lots)	506	547	(7%)
ADT of Northbound Bond Connect (RMBbn)	32.24	26.6	21%

1. Includes buy and sell trades under Stock Connect
2. ADT of Southbound Trading is included within Headline ADT.
3. Chargeable ADV excludes administrative trades (Admin Trades) and other non-chargeable trades.
4. New record high in 2022

1 For the purposes of this announcement, EBITDA is defined as earnings before interest expenses and other finance costs, taxation, depreciation and amortisation. It excludes the Group's share of results of the joint ventures. EBITDA margin is calculated based on EBITDA divided by revenue and other income less transaction-related expenses.

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Comparison of Q4 2022 with Q4 2021 Results

Financial Highlights

• Q4 2022 revenue and other income of $5,201 million was 10 per cent higher than Q4 2021, reaching record fourth quarter high
• • Core business revenue was up 7 per cent against Q4 2021, attributable to the increase in net investment income from Margin Funds
  • Net investment income on Corporate Funds was up 52 per cent against Q4 2021 due to higher interest income and higher fair value gains of the External Portfolio, but was partly offset by a non-recurring valuation gains of long-term equity investments in 2021
• Operating expenses were up 12 per cent, attributable to higher staff costs and professional fees
• EBITDA margin remained the same at 74 per cent
• Profit attributable to shareholders was $2,979 million, 11 per cent higher than Q4 2021, reaching record fourth quarter high

Key Financials

	Q4 2022	Q4 2021
	$m	$m	Change
Revenue and other income
Core business revenue	4,772	4,458	7%
HKEX Foundation donation income	53	26	104%
Net investment income of Corporate Funds	376	248	52%
	5,201	4,732	10%
Operating expenses	1,348	1,200	12%
EBITDA	3,807	3,498	9%
Profit attributable to shareholders	2,979	2,674	11%
Capital expenditure	411	404	2%
Basic earnings per share	$2.35	$2.11	11%

Key Market Statistics

	Q4 2022	Q4 2021	Change
ADT of equity products traded on the Stock Exchange 1 ($bn)	113.6	108.2	5%
ADT of DWs, CBBCs and warrants traded on the Stock Exchange ($bn)	13.6	18.2	(25%)
ADT traded on the Stock Exchange 1,2 (Headline ADT) ($bn)	127.2	126.4	1%
ADT of Northbound Trading of Stock Connect 1 (RMBbn)	97.6	110.9	(12%)
ADT of Southbound Trading of Stock Connect 1 ($bn)	39.4	27.9	41%
ADV of derivatives contracts traded on the Futures Exchange
('000 contracts)	8424	506	66%
ADV of stock options contracts traded on the Stock Exchange
('000 contracts)	641	510	26%
Chargeable ADV 3 of metals contracts traded on the LME ('000 lots)	482	555	(13%)
ADT of Northbound Bond Connect (RMBbn)	32.4	27.7	17%

1. Includes buy and sell trades under Stock Connect
2. ADT of Southbound Trading is included within Headline ADT.
3. Chargeable ADV excludes administrative trades (Admin Trades) and other non-chargeable trades.
4. New record quarterly high

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CHAIRMAN'S STATEMENT

2022 was a good year of strategic progress for HKEX, despite ongoing macro challenges and uncertainties. We have delivered a resilient full-year performance, reflecting the continued robustness and strength of our organisation and our markets. A significant number of important strategic initiatives were accomplished or announced during the year, which have positioned us well to continue to lead and shape the development of the region's global capital markets, supporting our vision to build the Marketplace of the Future.

Our Performance

The volatile macro environment during 2022 continued to impact trading and volumes across global markets, and Hong Kong was no exception. However, market sentiment began to improve in the fourth quarter, resulting in a strong end to the year for HKEX. Throughout the year we were also pleased to see strong performance in the Hong Kong Derivatives Market, with new trading records set across our USD/CNH Futures and a number of other individual derivatives products. Trading through Stock Connect remained resilient, and Northbound Bond Connect trading continued to record new highs in trading volume and number of investors. Driven by the renewed momentum in our IPO market in the second half of the year, Hong Kong remained as one of the world's most active IPO fundraising hubs, raising a total of $104.6 billion in 2022.

The chargeable average daily volume of metals contracts traded on the LME decreased by 7 per cent from 2021, amid challenging market conditions.

Total revenue and other income of the Group, for the year ended 31 December 2022, amounted to $18,456 million and the profit attributable to shareholders was $10,078 million, down 12 per cent and 20 per cent respectively, from the record highs in 2021.

Dividend

The Board declared payment of a second interim dividend of $3.69 per share, wholly in cash, which, together with the first interim dividend of $3.45 per share paid in September 2022, results in a full-year dividend of $7.14 per share.

Strategic Update

In 2022, we made notable progress in strengthening our mutual market connectivity, diversifying our product offerings and enhancing the attractiveness, liquidity and vibrancy of our markets, further deepening our value proposition as a gateway connecting China and the world.

Of particular note was the inclusion of ETFs in Stock Connect, the announcement of the launch of Swap Connect and the proposed inclusion of Hong Kong primary-listed international companies in the Southbound Stock Connect, each marking a new milestone in the further development and connectivity between Hong Kong and Mainland China's capital markets. The launch of Core Climate, Hong Kong's new international carbon marketplace, was another highlight and supports both our commitment to the regional and global growth of a vibrant carbon ecosystem and a healthy sustainable future for us all. In December 2022, we announced that the HKD-RMB Dual Counter Model will be introduced in the first half of 2023, supporting the continued internationalisation of the RMB and further elevating Hong Kong's role as the world's premier offshore RMB hub; we also launched a new Hong Kong SPAC listing framework in January 2022 as well as a market consultation on new listing rules for specialist technology companies in October 2022, which all continue to enhance Hong Kong's reputation as the global listing venue of choice.

Through these initiatives, and other initiatives, we continue to strengthen the global competitiveness and relevance of our markets, reinforcing our leadership role at the heart of the global financial community.

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