Hong Kong Exchanges and Clearing : HKEX 2022 First Quarter Resultspdf

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)

QUARTERLY RESULTS

FOR THE THREE MONTHS ENDED 31 MARCH 2022

HIGHLIGHTS

Nicolas Aguzin, Chief Executive Officer said:

"Throughout Q1 2022, HKEX demonstrated its robustness and resiliency despite ongoing market volatility and geopolitical fragility. Cash Market trading volumes remained at long-term normalised levels, our IPO pipeline was incredibly strong, we welcomed a range of new products such as our first SPAC listing and a number of new thematic ETFs, and we announced some important market-enhancing initiatives such as Derivatives Holiday Trading and IR Connect. However, we were not immune to global market sentiment which resulted in some softness in the IPO market, reduced valuations in our investment portfolio and pricing volatility in our commodities market. Looking forward, I am confident that we remain extremely well-placed, with a range of significant opportunities ahead. We have a strong team, a clear strategy and we are fully focused on delivering our vision to build the Marketplace of the Future."

Strategic Highlights

•  HKEX Corporate Day on 29 March outlined HKEX's vision and strategy, setting out a roadmap to build the Marketplace of the Future

•  Bond Connect Northbound ADT reached a record quarterly high of RMB33.9 billion

•  Special Purpose Acquisition Company (SPAC) listing route went live, and the first SPAC listed on 18 March 2022

•  IPO pipeline remains strong with over 150 active applications, including 10 SPAC applications, as at 31 March 2022

•  Derivatives Holiday Trading was announced in January and will commence on 9 May 2022

•  Q1 product launches included the first metaverse-themed ETF, first carbon futures ETF, and first Hong Kong equity ESG ETF

•  HKEX Foundation committed a further $10 million donation in support of Hong Kong Covid-19 pandemic relief programmes, and invited applications for its 2022 Impact Funding Scheme

Financial Highlights

•  Q1 2022 revenue and other income of $4,690 million was 21 per cent lower than record Q1 2021 (1 per cent lower than Q4 2021)

  • - Core business revenue was down 16 per cent against Q1 2021, reflecting lower trading and clearing fees driven by lower Headline ADT, and lower depository fees due to lower e-IPO service fees

  • - Net investment loss of Corporate Funds was $104 million (Q1 2021: income of $219 million), due to net fair value losses on collective investment schemes of $189 million (Q1 2021: gains of $159 million), reflecting lower global valuations in equity and fixed income markets

•  Operating expenses were 7 per cent higher than Q1 2021 (2 per cent lower than Q4 2021), attributable to higher staff costs and marketing expenses

•  EBITDA margin1 was 75 per cent, 6 per cent lower than record Q1 2021 (1 per cent higher than Q4 2021)

•  Profit attributable to shareholders was $2,668 million, 31 per cent lower than Q1 2021 (broadly flat against Q4 2021)

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.

Key Financials

Q1 2022	Q1 2021
$m	$m	Change
Revenue and other income
Core business revenue	4,764	5,691	(16%)
HKEX Foundation donation income	30	46	(35%)
Net investment (loss)/income of Corporate Funds	(104)	219	N/A
4,690	5,956	(21%)
Operating expenses	1,178	1,102	7%
EBITDA	3,473	4,809	(28%)
Profit attributable to shareholders	2,668	3,840	(31%)
Capital expenditure	190	331	(43%)
Basic earnings per share	$2.11	$3.03	(30%)
Key Market Statistics
Q1 2022	Q1 2021	Change
ADT of equity products traded on the Stock Exchange 2 ($bn)	126.0	198.0	(36%)
ADT of DWs, CBBCs and warrants traded on the Stock Exchange ($bn)	20.5	26.4	(22%)
ADT traded on the Stock Exchange 2,3 (Headline ADT) ($bn)	146.5	224.4	(35%)
ADT of Northbound Trading of Stock Connect 2 (RMBbn)	105.9	126.8	(16%)
ADT of Southbound Trading of Stock Connect 2 ($bn)	35.5	60.8	(42%)
ADV of derivatives contracts traded on the Futures Exchange ('000 contracts)	705	584	21%
ADV of stock options contracts traded on the Stock Exchange ('000 contracts)	637	827	(23%)
Chargeable ADV of metals contracts traded on the LME 4 ('000 lots)	588	536	10%
ADT of Northbound Bond Connect (RMBbn)	33.9*	25.3	34%
* New record quarterly high in Q1 2022

• 2 Includes buy and sell trades under Stock Connect

• 3 ADT of Southbound Trading is included within Headline ADT.

• 4 Chargeable ADV excludes administrative trades (Admin Trades) and other non-chargeable trades.

BUSINESS REVIEW

Overview

Fig. 1 - Market activity and Group's5 revenue and other income/(loss)

HKEX's Cash, Derivatives and Commodities businesses demonstrated their robustness and resiliency in Q1 2022, despite the resurgence of Covid-19 in Hong Kong and global geopolitical fragility. Headline ADT was $146.5 billion in Q1 2022, 35 per cent lower than the record Q1 2021, but 16 per cent higher than Q4 2021. Increased volatility and increased popularity of newly launched derivatives products resulted in solid growth in the number of derivatives contracts traded on HKFE in Q1 2022, with ADV 21 per cent higher than Q1 2021 and 39 per cent higher than Q4 2021. Commodities volume also registered moderate growth against Q1 2021 and Q4 2021, driven by the increase in volatility and commodity prices.

Revenue and other income for Q1 2022 was $4,690 million, 21 per cent lower than Q1 2021, due to lower trading and clearing fees from lower Headline ADT, and also net fair value losses on collective investment schemes of $189 million (Q1 2021: gains of $159 million), reflecting the broader performance of the global equity and fixed income markets. Compared with Q4 2021, revenue and other income in Q1 2022 was down marginally by 1 per cent, as the increase in trading and clearing fees from higher trading volumes was more than offset by the net fair value losses on collective investment schemes in Q1 2022.

Operating expenses increased by 7 per cent against Q1 2021, but were 2 per cent lower than Q4 2021. Compared with Q1 2021, the increase was mainly due to higher staff costs and higher marketing cash incentives for new products.

Looking forward, HKEX is fully focused on delivering its vision to build the Marketplace of the Future, by strengthening Hong Kong as an international financial centre, facilitating the vital two-way capital flows between East and West, delivering vibrant, diversified markets, supporting the creation of great companies and putting our clients first.

5

HKEX and its subsidiaries, which include The Stock Exchange of Hong Kong Limited (SEHK or the Stock Exchange), Hong Kong Futures Exchange Limited (HKFE or the Futures Exchange), Hong Kong Securities Clearing Company Limited (HKSCC), HKFE Clearing Corporation Limited (HKCC), The SEHK Options Clearing House Limited (SEOCH), OTC Clearing Hong Kong Limited (OTC Clear), The London Metal Exchange (LME), LME Clear Limited (LME Clear), Qianhai Mercantile Exchange Co., Ltd. (QME), BayConnect Technology Company Limited (BayConnect) and other subsidiaries

Analysis of Results and Business Update by Operating Segment

Revenue Transaction-Q1 2022

and other income $m

Revenue and other income lessrelated expenses $m

Results by segment:

Cash

Equity and Financial

Derivatives Commodities Post Trade Technology Corporate Items

1,379

transaction-related expenses EBITDA

$m

-

926

Q1 2021

Revenue and other income less

Revenue Transaction- transaction-

$m

and other income $mrelated related expenses expenses $m $mEBITDA $m

1,379

(36)

1,804

1,215

1,820

• - 1,820 1,673

  890

  376

  702

  1,011

• (33) 978 801

  - (3)

  4,690

  276

  376

  1,801

  - - (39)

  (71)

  276

  (71)

  4,651

  214

  361

• - 361 197

  1,580

  2,248

• (12) 2,236 2,009

  205

  248

  - - (45)

• 248 180

  (443)

  268

• 268 (51)

3,473

5,956

5,911

4,809

Cash Segment

Analysis of Results

Revenue was down 24 per cent and EBITDA was down 27 per cent compared with Q1 2021.

Trading fees decreased by $428 million, or 33 per cent compared with Q1 2021. This was attributable to the 36 per cent decrease in ADT of equity products traded on the Stock Exchange and the 16 per cent decrease in ADT of Northbound Trading of Stock Connect. Trading tariffs dropped by 21 per cent, driven by the decrease in equity products traded.

Stock Exchange listing fees increased by $22 million, mainly due to an increase in forfeitures.

Operating expenses increased by 12 per cent due to higher allocated costs of the Listing Division, reflecting the higher listing fees from forfeitures of initial public offerings (IPOs) and lower listing fees from derivative warrants (DWs) and callable bull/bear contracts (CBBCs).

Q1 2022 vs Q1 2021 ($m)

Q1 2022

Q1 2022

Q1 2021

Q1 2021

Q1 2022

Q1 2021

Trading feesMarket data fees

Trading tariffsOther revenueStock Exchange listing fees

1 Excludes DWs, CBBCs and warrants (which are included under the Equity and Financial Derivatives segment)