Hong Kong To Face Challenging Second Half

Includes: EWH, HKG
by: Carl T. Delfeld

Hong Kong ETFs such as the iShares MSCI (NYSEARCA:EWH) and NETS (HKG) have been acting better during the past week even when China-focused ETFs are taking a drubbing.

But the venerable Hong Kong Stock Exchange fully expects a challenging second half of the year due to weaker investor sentiment, after Asia’s third largest exchange reported a 6% drop in second quarter net profits.

The bourse's average daily trading volume was down 23% during the first three months of the year at HK$76bn ($9.7bn) reports Leanne Wang of the Financial Times. In July, the average turnover volume slipped to HK$63bn. It also reported net profits of HK$1.32bn in the three months to the end of June, down from HK$1.4bn in the same period last year. Compared to the first quarter of this year, profits were down 20%.

The exchange said that volatile market conditions forced many companies to shelve or withdraw initial public offering plans during the second quarter, which resulted in a smaller number of newly listed derivative warrants and led to a pullback in listing fee revenues.