Bumper trading volumes boosted Hong Kong's exchange operator's first-quarter profits by a third, in a sign the exchange is moving to a 'new normal' level of activity that could cement its place among the world's top stock markets.
Hong Kong Exchanges & Clearing Ltd (HKEx) has seen its shares soar 65 percent so far this year, as a landmark trading link with Shanghai recovered from a sluggish start to send trading volumes and revenues through the roof.
Average daily turnover on the exchange more than doubled to HK$113 million in the first four months of this year compared with the same period a year ago. Analysts say the new level of trading activity could be sustained as Hong Kong becomes more connected with mainland China.
That boost "will propel Hong Kong from being a non-core market for global equity investors to potentially one of the world's core markets," Jonas Kan, analyst at Daiwa Capital Markets, wrote in a research note ahead of the earnings.
While Hong Kong is one of Asia's most important financial hubs, its stock exchange has long trailed global rivals in London, New York and Tokyo in terms of the volume and value of shares traded each day.
Hong Kong saw $413 billion worth of shares traded in January-March this year, according to data from the World Federation of Exchanges, a tenth of the value seen on the New York Stock Exchange and a third of the Tokyo Stock Exchange's.
Market participants say an influx of money from China could permanently alter the size and composition of Hong Kong's investor base.
"The Stock Connect Program is having an impact on the investor mix in Hong Kong and is likely to be long-lasting as domestic liquidity remains abundant," UBS Global Asset Management portfolio manager Bin Shi said.
HKEx said profits also increased as a result of its raising fees in January on the London Metal Exchange, which it bought in 2012. The promise of a link with Shenzhen's stock exchange, slated for later this year, has further boosted HKEx's prospects.