Hong Kong Exchanges & Clearing Ltd. · HKEX:388
Hong Kong Exchanges & Clearing — Hong Kong Exch & Clearing — FY2020 Earnings Presentation
30 slides from Hong Kong Exchanges & Clearing's earnings presentation, Feb 24, 2021
Slide 1: 2020 Annual Results Analyst Presentation
2020 Annual Results Analyst Presentation Calvin Tai Interim Chief Executive, HKEX Group Romnesh Lamba Co-President, HKEX Group Vanessa Lau Group Chief Financial Officer, HKEX Group 24 February 2021
Slide 2: Disclaimer
Disclaimer The information contained in this document is for general informational purposes only and does not constitute an offer, solicitation, invitation or recommendation to subscribe for or purchase any securities, or other products or to provide any investment advice or service of any kind. Thi
Slide 3: Agenda
Agenda 01 | 2020 Key Highlights 02 | HKEX Group Financial Review 03 | Business and Strategic Update 04 | Appendix
Slide 4: 2020 Key Highlights
2020 Key Highlights 1| Financial Performance • Record financial results for third consecutive year • Record revenue and other income of HK$19,190mn with core business revenue up by 24% YoY, reflecting higher trading and clearing fees driven by record headline ADT • Record Stock Connect revenue and o
Slide 5: HKEX Group Financial Review
HKEX Group Financial Review
Slide 6: Key Financial Highlights
Key Financial Highlights Record revenue and profit for third consecutive year Low interest rate environment impacted investment income (HK$) Total revenue & other income(2) Core business revenue(3) Net investment income +18% +24% -18% $16.3bn $19.2bn $13.6bn $16.9bn $2.7bn $2.2bn 2019 2020 2019 2020
Slide 7: 2020: Record Revenue and Profit for Third Consecutive Year
2020: Record Revenue and Profit for Third Consecutive Year Revenue and Operating Profit attributable to HKEX EBITDA Basic earnings per share other income(1) expenses(2) shareholders(3) (HK$ mn) (HK$) Total Total Total Total Total +18% +11% +19% +23% +22% Core business Core business Core business Cor
Slide 8: Q4 Reflects Fewer Trading Days, Lower Stock Connect and Derivatives Volumes
Q4 Reflects Fewer Trading Days, Lower Stock Connect and Derivatives Volumes, and Seasonality in Expenses Profit attributable to Revenue and other income(1) Operating expenses(2) EBITDA HKEX shareholders(3) (HK$ mn) Total Total Total Total -4% +19% -10% -13% Core business Core business Core business
Slide 9: 2020 Performance Above Historical Trendline
2020 Performance Above Historical Trendline Quarterly performance (HK$ mn) Profit attributable to shareholders (1) Revenue and other income 5,309 5,099 (2) Operating expenses EBITDA 4,773 4,288 4,290 4,150 4,044 4,102 4,177 3,987 4,009 3,722 3,758 3,571 3,746 3,523 3,155 3,454 3,307 3,318 3,048 3,21
Slide 10: Higher Revenue Across All Business Segments, Offsetting Lower Net Investment Income
Higher Revenue Across All Business Segments, Offsetting Lower Net Investment Income Segmental revenue (HK$ mn) 1,411 114 19,190 1,345 253 55 16,311 (299) +37% +8% +4% +23% +14% -24% +18% YTD2019 Q4 2019 Cash Equity and Financial Commodities Post Trade Technology Corporate Items YTD2020 Q4 2020 Deriv
Slide 11: Lower Net Investment Income in a Low Interest Rate Environment
Lower Net Investment Income in a Low Interest Rate Environment 2020: HK$2,228mn (2019: HK$2,729mn) External portfolio – lower gains reflecting market valuations Average fund size Internal funds – lower income from reduced interest rates, partly (HK$ bn) offset by higher fund sizes 206.0 170.3 30
Slide 12: Operating Expenses, Depreciation & Amortisation
Operating Expenses, Depreciation & Amortisation Investment in Talent, Infrastructure and Strategic Initiatives Staff costs and IT & computer HKEX Foundation Other operating Depreciation and Premises expenses Professional fees Total opex (2) related expenses maintenance exp charitable donations expen
Slide 13: Business and Strategic Update
Business and Strategic Update
Slide 14: Key Macro Growth Drivers Observations
11 || Key Key Macro GrowthObservations Drivers Emerging New Economy Sectors Enhancing HK Market’s Strength and Relevance as an IFC Continued Reform and Opening-up of China’s Capital Markets Supporting Growing Capital Inflow Structural Shifts Attracting Southbound Capital into the HK Market 14
Slide 15: Emerging New Economy Sectors Enhancing HK Market's Strength
1 | Emerging New Economy Sectors Enhancing HK Market’s Strength and Relevance as an IFC IPO Fund Raising by Sector Relative Performance of Hang Seng Index and HS TECH Index No. of IPO – Total 250 174 218 183 154 – New Economy1 200 14 27 38 36 – Biotech2 150 0 5 9 14 100 IPO Funds 400 50 Raised (HK$
Slide 16: Business Strength and Resiliency Delivering Strong Performance
2 | Business Strength and Resiliency Delivering Strong Performance Robust Core Business Performance Against Challenging Macro Backdrop • Strong performance in Cash Market; Derivatives and FICC also performing well • Cash Market ADT +49%YoY at HK$129.5bn (record high) • Futures & Options ADV +6%YoY •
Slide 17: Strategic Plan on Track – 2020 Highlights (1/2)
3 | Strategic Plan on Track – 2020 Highlights (1/2) China Anchored – Facilitating China’s Internationalisation and Investment Diversification • Expanded Stock Connect underlying – inclusion of Shanghai STAR Market A-shares and their corresponding H-shares; HK-listed pre-revenue biotech companies • I
Slide 18: Strategic Plan on Track – 2020 Highlights (2/2)
3 | Strategic Plan on Track – 2020 Highlights (2/2) Technology Empowered – Leveraging New Technology for Modernisation and Growth • Streamlining IPO subscription and settlement cycle – published FINI concept paper • Automating and streamlining post trade work flow for NB Stock Connect – proposed lau
Slide 19: Looking Ahead
Looking Ahead Strong momentum into 2021 – record high monthly ADT in January Continued strong flow in Stock Connect – record monthly Southbound ADT in January; Northbound ADT reached the second highest monthly record Strong IPO pipeline – new economy, biotech and homecoming listings Signs of
Slide 20: Welcome questions
2020 Financial Performance (vs. 2019) • Record Revenue and PAT for third consecutive year • Core Business Revenue up 24%; Total Revenue and Other Income up 18% to HK$19.2bn • Record Revenue for Connect Schemes; HKEX #2 by IPO funds raised • EBITDA up 19% to HK$14.6bn • PAT up 23% to HK$11.5bn • Divi
Slide 21: Appendix
Appendix x
Slide 22: Financial Highlights – Income Statement
Financial Highlights – Income Statement % of Revenue & % of Revenue & (HK$ mn, unless stated otherwise) 2020 2019 YoY Change Other Income Other Income Results Revenue and other income 19,190 100% 16,311 100% 18% Less: Transaction-related expenses (110) (1%) (51) (0%) 116% Revenue and other income le
Slide 23: Performance by Operating Segment
Performance by Operating Segment Equity & Corporate Group Group HK$ mn Cash Financial Commodities Post Trade Technology Items 2020 2019 Derivatives Revenue and other income 4,991 3,241 1,454 7,637 910 957 19,190 16,311 % of Group Total 26% 17% 7% 40% 5% 5% 100% 100% Less: Transaction-related - (85)
Slide 24: External Portfolio – Annualised Return of 6.7% since Inception
External Portfolio – Annualised Return of 6.7% since Inception Point of Injection / Redemption Cumulative gains since inception (HK$ mn) 3000 600 MSCI World 2017: 2018: 2019: 2020: 580 +23.4% -8.6% +27.1% +15.3% 2,000 Return (Net): 1,808 HK$3.3bn 560 1,600 2500 HK$2bn redemption(2) injection(1) 540
Slide 25: Jumbo IPOs Contributing to Increased Trading Activity
Jumbo IPOs Contributing to Increased Trading Activity 28 Jumbo IPOs >US$1bn (HK$7.8bn) since Jan 2018 Rising contribution to volumes from Jumbo IPOs IPO size Rank Company name IPO date (HK$bn) Cash Market ADT (HK$ bn) contributed 1 Alibaba Group - SW 26/11/2019 101.20 by the Jumbo IPOs and related S
Slide 26: Trading Volume Migration and ADR Conversion from Secondary Listings
Trading Volume Migration and ADR Conversion from Secondary Listings HKEX Trading Share – 2020 ADR conversion to HK shares % of Alibaba NetEase JD.com Alibaba NetEase JD.com Trading +560% +145% 16.5% +73% 12.5% SEHK 18.1% 32.9% 22.5% 8.8% 5.1% 5.1% FINRA ADF 29.5% 16.5% 26.9% 2.5% 26/11/2019 Dec-20 1
Slide 27: Stock Connect – Trading Trends
Stock Connect – Trading Trends Stock Connect generated record revenue of HK$1,926mn in 2020, 91% higher than 2019 (HK$1,009mn) Stock Connect Average Daily Trading Volume (HK$ bn) Shenzhen Southbound Shenzhen Northbound (1) Total average daily trading volume NB record of SB record Shanghai Southbound
Slide 28: Continued Reform and Opening Up of China's Capital Markets
Continued Reform and Opening Up of China’s Capital Markets (RMB bn) Total A-share foreign holding market cap 3,000 2,912 5.0% Foreign Holdings in Chinese Bonds (US$ bn) RQFII QFII Long-only 3.2% 3.5% investment investment investment US$465bn 2,500 500 Bond 4.0% Pilot scheme 3.0% Connect to access la
Slide 29: Structural Shifts Attracting Southbound Capital into HK
Structural Shifts Attracting Southbound Capital into HK Mainland Mutual Funds with Ability to Invest into HK Southbound Stock Connect Net Buy # of Mutual Funds Annual Net Buy 672 (HK$ bn) 50+ 1,400+ Size of Mutual Funds (RMB bn) 2,027 340 246 249 551 349 83 86 127 2016 2017 2018 2019 2020 2016 2017
Slide 30: Thank you.
Thank you. For further information on HKEX, please go to hkexgroup.com and hkexnews.hk
Hong Kong Exch & Clearing — FY2020 Earnings Presentation on 6ix