HKEx second quarter profit climbs 9 percent on improved volumes, IPOs

HONG KONG (Reuters) - Hong Kong Exchanges and Clearing Ltd <0388.HK>, the world's second-largest exchange by market value, posted a 9.3 percent increase in second-quarter net profit, driven by higher trading volumes and a pick-up in initial public offerings.

Net profit rose to HK$1.17 billion ($151 million) in April-June from HK$1.07 billion a year earlier, HKEx said in a statement on Thursday. That roughly matched analysts' expectations for HK$1.2 billion ($155 million), according to Thomson Reuters SmartEstimates.

The exchange, led by former JP Morgan China Chairman Charles Li, has this year reversed a trend of declining trading volumes.

In the first six months of the year it reported average daily turnover up 20 percent from a year earlier. Trading demand has been boosted by an increase in new issuance as funds raised from initial public offerings rose 29 percent thanks mainly to two big deals, Sinopec Engineering and China Galaxy Securities.

Still, analysts remain cautious about the exchange's longer-term prospects amid concerns over an uncertain supply of new listings from mainland Chinese firms. They also cite uncertainty over the costs associated with its acquisition last year of the London Metal Exchange, which now is ensnared in a U.S. class-action lawsuit alleging anticompetitive behavior in aluminum warehousing.

"LME management's initial assessment is that the suit is without merit and LME will contest it vigorously," HKEx said, reiterating a statement it made earlier this month.

Of 20 analysts covering the stock, five have a "buy" recommendation while nine have it at "hold" and six at "sell".

Shares of HKEx were down about 4 percent in the year to date, underperforming the benchmark the Hang Seng Index <.HSI>, which was largely flat.

($1 = 7.7553 Hong Kong dollars)

(Reporting By Lawrence White and Clare Baldwin; Editing by Chris Gallagher)