Hong Kong Exchanges & Clearing's earnings up 14% to $1.77b in Q2

Net investment income also increased 190%.

Hong Kong Exchanges & Clearing (HKEx) recorded 2Q17 earnings of HK$1.77b, up 14% yoy, above UOB Kay Hian's and consensus estimates.

"Its 1H17 earnings came in at HK$3.49b, up 17% yoy and accounted for 48% of our full-year estimate."

Here's more from UOB Kay Hian:

Net investment income up 190% yoy in 2Q17. The significant increase in investment income was the main reason for the better-than-expected earnings. The increase in investment income was driven by fair value gains on collective investment schemes under corporate funds. Besides this, higher interest rates and larger average size of margin funds also contributed to the increase.

Active cash market transaction offset by decrease in derivatives volumes. The cash market benefited from improved market sentiment, with ADT of equity products up by 27% yoy in 1H17. However, the increase was offset by a 24% yoy decline in derivatives due to lower market volatility. As a result, trading fees and trading tariff were slightly down by 1.5% yoy.

Stock Connect gaining momentum. The Stock Connect programmes contributed HK$87m in revenue in 2Q17, accounting for around 2.8% of group revenue. Southbound ADT nearly trebled on a yoy basis. As of Jul 17, trading volume of the southbound stock connect programme accounted for 5.8% of total turnover of the Hong Kong market.

More strategic and market development to be expected. The HKEx is actively pushing forward the launch of strategic initiatives, eg Qianhai Mercantile Exchange, RMB index futures etc. It is also putting in efforts towards listing reforms and market structure enhancement, eg launched consultation on proposed New Board to attract listing of new economy companies. While there have been no details on the timetable of the initiatives, we expect them to be gradually launched in 2H17 and 2018.