HKEX INVESTOR PRESENTATION. 9 May 2018

Transcription

1 HKEX INVESTOR PRESENTATION 9 May 2018

2 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. This document is solely intended for distribution to and use by professional investors. This document is not directed at, and is not intended for distribution to or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject Hong Kong Exchanges and Clearing Limited ( HKEX ) to any registration requirement within such jurisdiction or country. This document contains forward-looking statements which are based on the current expectations, estimates, projections, beliefs and assumptions of HKEX about the businesses and the markets in which it and its subsidiaries operate. These forward-looking statements are not guarantees of future performance and are subject to market risk, uncertainties and factors beyond the control of HKEX. Therefore, actual outcomes and returns may differ materially from the assumptions made and the statements contained in this document. Where this document refers to Shanghai-Hong Kong Stock Connect and/or Shenzhen-Hong Kong Stock Connect (together, the Stock Connect programs), please note that currently, access to northbound trading is only available to intermediaries licensed or regulated in Hong Kong; southbound trading is only available to intermediaries licensed or regulated in Mainland China. Direct access to the Stock Connect is not available outside Hong Kong and Mainland China. Where this document refers to Bond Connect, please note that currently, access to northbound trading is only available to foreign investors that are able to trade onshore bonds on the China Foreign Exchange Trade System & National Interbank Funding Centre. Although the information contained in this document is obtained or compiled from sources believed to be reliable, HKEX does not guarantee the accuracy, validity, timeliness or completeness of the information or data for any particular purpose, and shall not accept any responsibility for, or be liable for, errors, omissions or other inaccuracies in the information or for the consequences thereof. The information set out in this document is provided on an as is and as available basis and may be amended or changed. It is not a substitute for professional advice which takes account of your specific circumstances and nothing in this document constitutes legal advice. HKEX shall not be responsible or liable for any loss or damage, directly or indirectly, arising from the use of or reliance upon any information provided in this document. 2

3 Agenda 1 HKEX Group Financial and Market Update 2 HKEX Strategic Plan Agenda 3 China Connectivity Update 4 Appendix Financial supplement 3

4 2018 YTD Key Highlights Record high quarterly revenue +36% YoY and PAT +49% YoY in Q Strong growth in trading volumes in Q1 2018; Cash Market headline ADT +97% YoY, Futures and Options ADV +77% YoY Stock Connect and Bond Connect continued to gather momentum. Inclusion of China A shares in MSCI s Emerging Markets Index and China s bonds in the Bloomberg Barclays Global Aggregate Index are expected to further drive volumes New rules became effective on 30 April 2018 to facilitate the listing of issuers from emerging and innovative sectors Maintained prudent cost management while investing in key strategic initiatives, including platform and infrastructure 4

5 YTD YTD YTD YTD Volumes Increased Across All Asset Classes Securities ADT (HK$ billion) Derivatives ADV ( 000 contracts) 137 Futures Options 1, (1) (1) Total Funds Raised (HK$ billion) IPO Follow On , Commodities ADV ( 000 lots) (1) (1) Source: HKEX & LME data (1) 2018 YTD as of 30 April

6 Highlights Q Results Prior year comparison Revenue and Other Operating Profit Attributable to Basic Earnings Per income Expenses (1) EBITDA Income HKEX Shareholders Share ($ million) ($) + 36% + 12% + 45% + 49% + 47% ADT $74.3bn +97% $146.1bn 73% Margin 77% 4,150 3,048 3,215 2,215 1,716 2, Q Q Q Q Q Q Q Q Q Q Trading and clearing fees from ADT & derivatives ADV but partly offset by LME fee discounts Listing fees Staff, IT and Premises expenses Group EBITDA margin 4% PAT % more than EBITDA due to lower % in D&A % increase lower than PAT due to shares issued for scrip dividends Net investment income (1) Excludes depreciation and amortisation, finance costs, and share of profits less losses of joint ventures 6

7 Revenue Movement by Segment ($ million) Increase came from cash and derivatives trading & clearing fees and listing fees ,150 3, (25) (123) +53% +91% -7% +37% +6% -55% +36% Q Cash Equity Equity and Financial Derivatives % Change year-on-year Trading fees & tariff from ADT of equity products Listing fees due to listed cos and IPOs Trading fees from ADT of DWs, CBBCs & warrants, and derivatives ADV Listing fees due to record quarterly newly listed DWs and CBBCs Commodities Clearing Platform and Infrastructure Trading fees from fee discounts Clearing fees from HK ADT and SI Net investment income due to Margin Fund size and return Partly offset by one-off Lehman post-liquidation interest in Q Hosting services fees due to new customers and increased usage Corporate Items Q Net investment income (1) Headline ADT up 97% (Q1 2018: $146.1bn; Q1 2017: $74.3bn); ADT of cash equity up 95% (Q1 2018: $113.3bn; Q1 2017: $58.1bn); ADT of DWs, CBBCs and warrants included under equity and financial derivatives up 102% (Q1 2018: $32.8bn; Q1 2017: $16.2bn) 7

8 Performance by Operating Segment EBITDA Cash Equity Equity & Financial Derivatives Commodities Clearing Platform & Infrastructure Group Total (incl. Corp. Items) ($ million) + 67% + 109% - 32% + 44% + 9% + 45% % % EBITDA Margin Share of Group EBITDA (before Corporate Items) 73% 77% 3,215 81% 88% 77% 85% 69% 51% 83% 87% 73% 75% 2,215 1, % 30% % 24% 11% 5% % 38% % 3% 100% 100% Q Q Q Q Q Q Q Q Q Q Q Q Trading fees & tariff from ADT of equity products Listing fees due to listed cos and IPOs Opex due to allocated costs of Listing Division Trading fees due to ADT of DWs, CBBCs & warrants & derivatives ADV Listing fees due to record quarterly newly listed DWs and CBBCs Opex due to allocated costs of Listing Division Trading fees from fee discounts Opex due to one-off insurance recovery of legal costs in 2017, staff costs, IT costs and stronger GBP Clearing fees from HK ADT and SI Net investment income on Margin Fund size and return Offset by one-off Lehman post-liquidation interest of in Q Opex due to staff costs Hosting services fees due to new customers and increased usage Overall EBITDA margin 4% 8

9 Quarterly Trend Quarterly performance ($ million) Profit attributable to Shareholders Revenue and Other Income 4,057 4,150 Operating Expenses (1) EBITDA 2,757 2,471 2,796 3,195 3,747 2,866 2,775 2,751 2,879 2,848 2,638 3,048 3,155 3,454 3,523 2,567 2,555 3,215 2,335 2,286 1,601 1,597 1,178 1,189 1,718 1,287 1,975 1,511 2,078 1,575 2,520 2,330 1,946 1,531 1,897 1,432 2,045 2,014 1,553 1,543 1,705 1,241 2,215 1,716 2,277 1,777 2,033 1,878 2, Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q Record quarterly revenue and PAT were achieved in Q due to significantly higher market volumes (1) Excludes depreciation and amortisation, finance costs, and share of profits less losses of joint ventures (2) Dotted trend lines are illustrative and do not constitute a forward forecast 9

10 Agenda 1 HKEX Group Financial and Market Update 2 HKEX Strategic Plan China Connectivity Update 4 Appendix Financial supplement 10

11 Our Journey So Far Hong Kong Mainland China Offshore fundraising centre Segregated from Mainland market IPO Era Fast Economic Growth Privatisation of SOEs Capital gateway for IPO proceeds Limited direct access: QFII & QDII Domestic Growth Era Domestic capital markets develop Retail investors are the driving force Derivatives turnover grows quickly RMB trade settlement and payments Expansion of direct access: RQFII Offshore RMB benchmarks Opening Up Era RMB internationalisation Progressive two-way capital opening Expansion of Free Trade Zones Mutual Market Era Shanghai-Hong Kong Stock Connect Shenzhen-Hong Kong Stock Connect Mutual Recognition of Funds (MRF) Bond Connect 11

12 HKEX Achieved a Number of Strategic Milestones in 2017 E Q U I T Y FIC C O M M O D I T I E S Listing regime revamp GEM reform (effective 15 Feb 2018); Listings of Biotech issuers and companies with WVR structure; secondary listing route for Greater China and international companies (effective 30 April 2018) Stock Connect programmes Further Stock Connect enhancements Bond Connect A key catalyst for our FIC derivatives New products CNH options LME commercialisation Further business optimisation Precious metals London gold; Hong Kong gold Products and platform HK Leveraged & Inverse Products; enhanced stock options position limit regime; microstructure enhancements OTC capabilities Client clearing QME spot market Continue to build the platform and adapt to new onshore regulatory regime 12

13 2018 Primary Focus MAKE IPO MARKET MORE RELEVANT MAKE CASH MARKET MORE CONNECTED MAKE DERIVATIVES MARKET MORE COMPETITIVE Launch New Listing Regime Enhance Stock Connect Launch A-share Derivatives; Reform Trading Regimes EFFECTIVE ON 30 APRIL: FIRST LISTINGS UNDER THE NEW REGIME EST. JUN/JUL 2018 MSCI INCLUSION IN MAY&AUGUST; NORTHBOUND INVESTOR ID PLANNED FOR Q3 2018; ETF CONNECT FILL GAPS" IN PRODUCTS AND SERVICES; ENHANCE RISK MANAGEMENT REGIME 13

14 Other Key Initiatives EQUITY Launch new products - Extend existing HSI and HSCEI product suite; Introduce trading enhancements to existing futures and options After-hours derivatives trading - Include equity index option contracts FIC Enhance Bond Connect - Broaden access platform choice and explore Southbound model Launch RMB interest rate derivatives product suite - Meet growing risk management needs COMMODITIES Optimise LME - Complete new fee regime and upgrade systems Prepare to launch QME spot market - Serve China s real economy PLATFORM / TECHNOLOGY Upgrade derivatives trading and clearing systems - Genium Upgrade planned for Q Kickoff Next Gen Post-trade Platform - Build data warehouse, risk engine, client portal Implement new margining model - Bring efficiency and savings to our market Build Innovation Lab - Advance deployment of Fintech at HKEX 14

15 Three New Chapters to Attract Emerging & Innovative Companies Changes to Main Board Rules: 1 BIOTECH Chapter Attract R&D focused Biotech companies At least one Core Product beyond concept stage (e.g. completed FDA Phase I) Market cap HK$1.5bn Primarily engaged in R&D to develop Core Product(s) Meaningful third party investment from sophisticated investors Effective on 30 APRIL WVR Chapter Attract innovative and high growth companies Must be an innovative company with high growth WVR shares for individuals only - must be directors and been responsible for growth of business Market cap HK$10bn and HK$1bn of revenue (1) Meaningful third party investment from sophisticated investors Need to meet additional disclosure requirements and safeguards 3 SECONDARY LISTING Chapter Attract innovative and high growth companies Allow Greater China companies to secondary list in Hong Kong Market cap HK$10bn and HK$1bn of revenue (2) Primary listed on NYSE / NASDAQ / LSE (3) for at least 2FYs with good compliance (1) Revenue requirement applies if market cap is less than HK$40bn (2) Revenue requirement applies if market cap is less than HK$40bn and the issuer has WVR or has a centre of gravity in the Greater China region (3) Main Market of the LSE (and belonging to the UK FCA s Premium Listing segment) 15

16 LME Strategic Pathway: Overview Strategic principles Serve the physical market Ensure fairness Increase user choice Maximise trading efficiency What are we doing now? Carry fee discount Carry fee discount OTC financial fee fee What are we doing over time? Ecosystem Trading and booking structure Clearing structure Delivery and physical structure Membership Volumes, competition, fees and growth Investigate market structure tools to ensure all participants add liquidity and enhance execution quality Deliver convergence between the onexchange and OTC (dealer-to-client) spaces by providing a range of client execution and clearing opportunities Enhance efficiency of clearing by optimising margin methodology and providing best-in-class tools for the efficient mobilisation of assets Maintain ongoing review to optimise the physical market structure and ensure it represents best practice Protect the value of LME membership and B shares, but lower barriers to entry by providing fair access to all Maximise trading volumes by delivering a fair fee schedule and new products and services 16

17 Enhanced volumes LME Strategic Pathway: Volumes, Competition, Fees and Growth Maximise volumes and deliver new products Fairer fees Fairer fees Intended actions: Reduced carry fees Introduce financial OTC booking fee for fairness Medium-term fee structure review Market protection Intended actions: Regulate inter-office booking Ensure LMEselect trades booked appropriately e.g. charge for green trades New products Intended actions: Add to and enhance: LMEprecious; ferrous metals; battery metals for electric vehicles Broaden range of clearable products Strategic direction: Maximise trading volumes by delivering a fair fee schedule and new products and services 17

18 HKEX s Strategic Vision What have we achieved so far? What is our long-term aspiration? 1 Expanded our asset class reach 2 Created mutual market access channels Issuers / Products WEALTH MANAGEMENT CENTRE Issuers / Products Mainland RISK MANAGEMENT CENTRE International 3 Enhanced market microstructure and efficiency Investors RMB PRICING CENTRE Investors 4 Continued to build and upgrade systems and platforms 18

19 Agenda 1 HKEX Group Financial and Market Update 2 HKEX Strategic Plan Agenda 3 China Connectivity Update 4 Appendix Financial supplement 19

20 HKEX Mainland Strategy with Evolution of Cross-Border Integration Relationship Building Broadening and deepening China Inc. relationships Continued Harmonisation Trading hours Listing of Mainland companies RMB Readiness Infrastructure Products TSF CESC JV Index development with SSE and SZSE LME Acquisition Created leverage in commodities China Connectivity Mutual market access across asset classes Shanghai-Hong Kong Stock Connect Shenzhen-Hong Kong Stock Connect Bond Connect Issuers A+H Shares Institutional Quotas QFII / QDII Access Products ETFs / RQFII Individual Flows Shanghai-HK Stock Connect Shenzhen-HK Stock Connect Mutual Recognition of Funds Bond Connect RMB Internationalisation China s rollout of Mutual Market Access remains on track 20

21 Regulatory Cooperation Clearing Link Clearing Link Enlarged and Enhanced Connect Ecosystem CSRC * Note: Eligible shares for the Shanghai & Shenzhen Southbound Mainland investors links are different M AI SSE/SZSE Members & ChinaClear Participants ChinaClear SH ChinaClear SZ Home Market rules N LA SSE SZSE N D H O N G Order Routing SSE SPV SH A Shares Eligible Shares SEHK SH SPV Eligible Shares* HK Shares SEHK SZ A Shares Eligible Shares SEHK SZ SPV SZSE SPV Order Routing Enforcement Cooperation Leverages existing infrastructure Gross order routing RMB Super-clearer model K O N G HKSCC EPs / CPs HK & Overseas investors Regulatory cooperation SFC Stock Connect brings together two different market structures to facilitate seamless cross-border trading * Note: Eligible shares for the Shanghai & Shenzhen Southbound links are different 21

22 Key Features of Shanghai & Shenzhen Connect Estimated data as of end Mar 2018 Shanghai NB Connect Shenzhen NB Connect N O RT H B O UN Eligible Stocks Quota No. Mkt Cap ADT Agg. Quota Dly. Quota 577 (One single board) RMB 26.9 tri (83%) RMB 169 bn (74%) Removed RMB 52 bn (Main: 274, SME: 431, ChiNext: 198) RMB 17.4 tri (75%) RMB 176 bn (70%) None RMB 52 bn D Investors Eligibility None ChiNext participation limited to institutional professional investors initially 3 Shanghai SB Connect Shenzhen SB Connect S O UT Eligible Stocks No. Mkt Cap 315 (Hang Seng Composite LargeCap, MidCap & A+H shares not in indices) HKD 29 tri (84%) (Hang Seng Composite LargeCap, MidCap, SmallCap & A+H shares not in indices ) HKD 30 tri (89%) H B O UN Quota ADT Agg. Quota Dly. Quota HKD 93 bn (88%) Removed RMB 42 bn HKD 100 bn (95%) None RMB 42 bn D Investors Eligibility RMB 500k RMB 500k (1) SZ Northbound: Constituents of SZSE Component & SZSE Small/Mid Cap Innovation indexes with market capitalization of at least RMB 6 bn (average daily market cap in 6 months prior to the periodic review of relevant index, i.e. 1 May 2016 to 31 Oct 2016; to be reviewed half-yearly), and SZSE-SEHK A+H shares (except shares under risk alert or delisting arrangement) (2) SZ Southbound: Constituents of Hang Seng Large & MidCap indexes, constituents of Hang Seng SmallCap index with market capitalization of at least HKD 5 bn (average month-end market cap in 12 months prior to the periodic review of the index, i.e. 1 Jan 2016 to 30 Dec 2016; to be reviewed half-yearly), and SSE-SEHK and SZSE-SEHK A+H shares (3) Subject to resolution of related regulatory issues, other investors can trade ChiNext stocks listed on Shenzhen Stock Exchange 22

23 The Level of Penetration in the Equity Market through Stock Connect % of listed companies in the mutual market* % of all China & HK* listed companies: MUTUAL MARKET SSE Connect only Including SZSE connect By Market Cap SSE SZSE 83% 75% 89% (from 84% under SSE Connect) 59% 82% By Turnover SSE SZSE 74% 70% 95% (from 88% under SSE Connect) 31% 68% By Number SSE SZSE 41% 43% % (from 15% under SSE Connect) 16% 36% Shenzhen Connect represents a significantly increased penetration of China and Hong Kong listed companies Data as of 29 Mar 2018 * HK data based on HKEX Main Board only 23

24 MSCI China A Shares Inclusion MSCI announced on 20 June 2017 that it will include 222 China A Large Cap shares in the MSCI Emerging Markets Index Others 35.71% IN 8.75% Today (1) TW 12.23% China 27.66% (3) KR 15.65% Include only Large Cap shares accessible through Stock Connect Include A shares that have H shares listings Exclude: Stocks suspended for >50 days in the past 12M Stocks suspended at time of index reviews 2-step inclusion process of 5% inclusion 2.5% inclusion on 31 May 2018 August 2018: 5% Inclusion (2) 5% inclusion at the Aug 2018 quarterly index review Others 34.63% IN 8.75% TW 12.07% China 28.55% KR 15.27% China Total: 29.28% (3) China A shares 0.73% Roadmap of Future China A Shares Inclusion Potential increase of the currently announced 5% Inclusion Factor Potential addition of China A Mid Cap shares Subject to: Greater alignment of the China A shares market with international market accessibility standards The resilience of Stock Connect The relaxation of daily trading limits Continued progress on trading suspensions Further loosening of restrictions on the creation of index-linked investment vehicles MSCI may revise the planned implementation to a single phase should the daily limit be abolished or significantly expanded before the scheduled inclusion dates Source: MSCI as of 21 June 2017 (1) As of 31 May 2017 (2) The 5% inclusion factor will be applied to the free-float market cap of China A share in the MSCI China Index at the review date (3) Including H-shares(HK), Red Chip(HK), P Chip(HK) and B-shares(Mainland) and Overseas 24

25 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Market Activity in Mainland and Hong Kong Markets ADT RMB bn Index 3, : +2% 2016: -5% 2017: +21% 2018: -8% 6,000 3,000 2,500 2,000 1,500 1, ,746 1,560 1,432 1, , ADT HKD bn SSE ADT (LHS) SZSE ADT (LHS) CSI 300 (RHS) 5,000 4,000 3,000 2,000 1,000 0 Index January June 2015 China A Share rally Hong Kong index and volumes catch-up July 2015 July 2016 Downturn in A Share market, followed by significant policy actions by Mainland authorities 1H 2016 more subdued cash market activity both locally and globally : -8% 2016: +3% 2017: +35% 2018: +1% ,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Since August 2016 Shenzhen Connect announced on 16 August 2016 and launched on 5 December 2016 Market sentiment turned bullish since early 2017 and trading momentum continued to be strong in 2018 driven by Stock Connect and new listing reform HKEX ADT (LHS) Hang Seng Index (RHS) Source: HKEX,SSE,SZSE & Bloomberg, as of 30 April

26 Stock Connect Trading Trends Stock Connect contributed $172m in income in Q1 2018, 129% higher than Q Stock Connect Average Daily Trading Volume (HKD bn) Shenzhen Southbound Shanghai Southbound Shenzhen Northbound (1) Shanghai Northbound (1) Total average daily trading volume Percentage of Southbound turnover of Hong Kong Market SB record of HKD43.8bn on 6 Feb 2018 NB record of RMB33.8bn on 6 Feb % % 5.0% 5.0% 5.2% 5.5% 5.8% 6.1% 6.0% 6.1% 6.3% 6.4% 6.4% 6.0% 5.2% 4.3% % % 3.2% 3.1% 3.2% 3.4% % 1.5% 1.7% % % 0.5% 0.8% 0.6% 0.9% 1.0% 1.1% 1.2% 1.7% 1.6% 1.5% 1.9% 1.6% 2.0% 2.3% % 9.00% 7.00% 5.00% 3.00% 1.00% -1.00% -3.00% -5.00% Northbound turnover exceeded Southbound at the initial stage Southbound turnover picked up after the announcement of Shenzhen-Hong Kong Stock Connect (2) and the approval of onshore insurance funds to trade through Shanghai-Hong Kong Stock Connect (3) Aggregate quota removed since 16 August 2016; Shenzhen Connect launched on 5 December 2016; Daily quota quadrupled since 1 May 2018 Source: HKEX data as of 30 April 2018 (1) Northbound (NB) trading is conducted in RMB; The NB figures in the chart are converted to HKD based on the month-end exchange rate (2) CSRC and SFC jointly announced the approval of Shenzhen-Hong Kong Stock Connect on 16 August 2016 (3) China Insurance Regulatory Commission (CIRC) published the notice on 8 September

27 Stock Connect Shareholding Value Northbound (1) : RMB592bn; Southbound (2) : HKD1,055bn Rank Stock name Northbound Top 20 (3) Share value in CCASS (RMB Mil) % of the total number of issued shares Venue 1 Kweichow Moutai 53, % SH 2 Hangzhou Hikvision Digital Technology 40, % SZ 3 Midea Group 35, % SZ 4 Jiangsu Hengrui Medicine 34, % SH 5 Ping An Insurance * 27, % SH 6 China Yangtze Power 18, % SH 7 Gree Electric 17, % SZ 8 Shanghai International Airport 17, % SH 9 Inner Mongolia Yili Industrial 16, % SH 10 Wuliangye Yibin 12, % SZ 11 China International Travel Service 11, % SH 12 China Merchants Bank * 10, % SH 13 Saic Motor Corporation 9, % SH 14 Foshan Haitian Flavouring And Food 8, % SH 15 Jiangsu Yanghe Brewery Joint-Stock 8, % SZ 16 Anhui Conch Cement Company * 8, % SH 17 Qingdao Haier 8, % SH 18 Founder Securities 7, % SH 19 Yunnan Baiyao Group 7, % SZ 20 Zhengzhou Yutong Bus 6, % SH Rank Stock name Southbound Top 20 (3) Share value in CCASS (HKD Mil) % of the total number of issued shares 1 HSBC 102, % 2 CCBC* 81, % 3 Tencent 80, % 4 ICBC* 78, % 5 Sunac China 37, % 6 China Merchants Bank* 21, % 7 Fullshare 20, % 8 BOC* 18, % 9 CITIC Bank * 17, % 10 Geely Automobile 17, % 11 Ping An Insurance* 14, % 12 New China Life Insurance* 12, % 13 ABC* 11, % 14 China Pacific Insurance* 11, % 15 China Taiping Insurance Holdings 10, % 16 CSPC Pharmaceutical 9, % 17 Great Wall Motor * 9, % 18 SMIC 8, % 19 Fosun International 7, % 20 Guangzhou Automobile* 7, % Source: Bloomberg and HKEX data as of 30 April 2018(* A&H listed stocks) (1) Shanghai Northbound: RMB366bn; Shenzhen Northbound: RMB226bn (2) Shanghai Southbound: HKD856bn; Shenzhen Southbound: HKD199bn (numbers do not add up due to rounding) (3) Ranked by share value in CCASS 27

28 Northbound Stock Connect Top 10 Traded Stocks Shanghai Hong Kong Stock Connect Shenzhen Hong Kong Stock Connect Rank Stock Name ADT RMB Million % Rank Stock Name ADT RMB Million % 1 Kweichow Moutai % 1 Gree Electric Appliances % 2 Ping An Insurance* % 2 Hangzhou Hikvision Digital Technology % 3 Jiangsu Hengrui Medicine % 3 Midea Group % 4 Inner Mongolia Yili Industrial % 4 Wuliangye Yibin % 5 Anhui Conch Cement* % 5 China Vanke* % 6 CITIC Securities % 6 Jiangsu Yanghe Brewery % 7 China Merchants Bank* % 7 Focus Media Information Technology % 8 SAIC Motor % 8 BOE Technology % 9 Zhengzhou Yutong Bus % 9 Ping An Bank % 10 China International Travel Service % 10 Han's Laser Technology % Source: HKEX, from 1 April to 30 April 2018 (* A&H listed stocks) 28

29 Southbound Stock Connect Top 10 Traded Stocks Shanghai Hong Kong Stock Connect Shenzhen Hong Kong Stock Connect Rank Stock Name ADT HKD Million % Rank Stock Name ADT HKD Million % 1 Tencent % 1 Tencent % 2 CCB* % 2 SMIC % 3 SMIC % 3 Kingdee Int l % 4 Sunac China % 4 Sunac China % 5 Ping An Insurance* % 5 Country Garden % 6 AAC % 6 Sunny Optical % 7 ICBC* % 7 Goldwind % 8 CSPC % 8 Ping An Insurance* % 9 China Merchants Bank* % 9 Genscript Bio % 10 ABC* % 10 CCB* % Source: HKEX, from 1 April to 30 April 2018 (* A&H listed stocks) 29

30 Tapping into China s Vast Bond Market China s Bond Market International Investors USD39tn Outstanding, USD tn % 249% 87% Relative to GDP 146% 171% 157% US JP China DE FR UK Key Policy Drivers Risk migration from banking sector to bond market Greater credit differentiation amid ongoing market reforms Funding needs for economic transition and infrastructure projects e.g. Belt & Road; Panda bonds Enhanced bond issuance and disclosure standards USD9tn 56% SSE 44% SZSE USD12tn ~90% Interbank ~10% Exchange Bank Assets Equities Bonds Growing International Demand Yield differential against developed markets Inclusion in emerging market bond indices Geographical and asset class diversification Growing convertibility of RMB / SDR inclusion More efficient access Bond Connect Sources: WIND, CBRC (Feb 2018), IMF, SIFMA 30

31 Foreign Holdings in CIBM (RMB tn) Foreign Participation in China s Bond Market Foreign Participation in the CIBM Foreign Bond Holdings, RMB trillions International Bond Market Comparison Foreign Ownership % 1.40 CCDC SCH RMB1.3tn 68% 64% 1.20 Bond Connect % 41% 39% 38% Average: 38.5% % Achievable target % 15% % ~2% /17 04/17 05/17 06/17 07/17 08/17 09/17 10/17 11/17 12/17 01/18 02/18 03/18 DE FR AU UK IT CA US RU JP China Foreign participation in the CIBM increased by 55% over the 9 months since launch of Bond Connect Sources: ChinaBond + SCH, Bloomberg, BIS 31

32 What is Bond Connect? Next evolution in the Mutual Market Access scheme developed by HKEX after Shanghai & Shenzhen Connect Northbound to launch first: foreign investors can trade the China interbank bond market on CFETS (1) Southbound to follow in due course: Mainland investors to trade in overseas OTC bond markets Key parties: Regulators: PBOC and HKMA Trading: CFETS, HKEX, BCCL (2), and Recognised Access Platforms Settlement: CMU (3), ChinaBond (4) and Shanghai Clearing House A simple and efficient access for offshore investors Full access to onshore bond market Deal with familiar trading interface Deal with familiar global custodian Nominee structure, with fully-secured holding of onshore securities using offshore cash A fully-fledged solution offering hedging for FX (CNH/CNY) and rates (OTC / ETD) Since launch on 3 July 2017, 288 approved international investors were participating in Bond Connect and foreign holdings in CIBM have increased by 55%, to RMB1,305bn as at 31 March 2018 Service fee A Service Fee, % of the notional value of transaction, applies to each trade executed through Bond Connect The Service Fee was waived for the first six months upon launch (from 3 July 2017 to 29 December 2017) (1) CFETS China Foreign Exchange Trade System & National Interbank Funding Centre (2) BCCL Bond Connect Company Limited (3) CMU Central Moneymarkets Unit of the Hong Kong Monetary Authority (4) ChinaBond / CCDC China Central Depository & Clearing Co., Ltd 32

33 Agenda 1 HKEX Group Financial and Market Update 2 HKEX Strategic Plan Agenda 3 China Connectivity Update 4 Appendix Financial supplement 33

34 Financial Highlights Income Statement ($ million, unless stated otherwise) Q % of Revenue & Other Income Q % of Revenue & Other Income Y-o-Y Change Results Revenue and other income 4, % 3, % 36% Operating expenses (935) (23%) (833) (27%) 12% EBITDA 3,215 77% 2,215 73% 45% Depreciation and amortisation (180) (4%) (175) (6%) 3% Operating profit 3,035 73% 2,040 67% 49% Finance costs and share of results of joint ventures (25) (1%) (31) (1%) (19%) Profit before taxation 3,010 72% 2,009 66% 50% Taxation (456) (11%) (299) (10%) 53% Loss attributable to non-controlling interests 8 0% 6 0% 33% Profit attributable to HKEX shareholders 2,562 62% 1,716 56% 49% Basic earnings per share $2.07 $ % Headline ADT on the Stock Exchange $146.1 bn $74.3 bn 97% Capex $153 m $139 m 10% 34

35 Performance by Operating Segment Q $ million Cash Equity Equity & Financial Derivatives Commodities Clearing Platform and Infrastructure Corporate Items Group Q Group Q Revenue and other income 1, , ,150 3,048 % of Group Total 27% 23% 8% 36% 4% 2% 100% 100% Operating expenses (131) (141) (170) (194) (36) (263) (935) (833) EBITDA , (163) 3,215 2,215 % of Group Total (1) 31% 25% 5% 40% 4% (5%) 100% 100% EBITDA margin 88% 85% 51% 87% 75% N/A 77% 73% Depreciation and amortisation Finance costs Share of profits less losses of joint ventures (180) (175) (27) (29) 2 (2) Profit before taxation 3,010 2,009 (1) % Share of Group EBITDA (including Corporate Items) 35

36 Operating Expenses and Depreciation & Amortisation Staff costs and related expenses ($ million) + 12% IT & computer maintenance exp Premises expenses Legal & professional fees + 13% + 14% + 360% - 28% (excluding one-off items) Other operating expenses (1) Depreciation and amortisation - 6% + 3% Q Q Q Q Q Q Q Q Q Q Q Q Staff costs due to headcount, bonus, and annual payroll adjustments due to maintenance expenses for new IT systems and network upgrades Rental expenses due to new offices One-off insurance recovery in Q relating to LME s warehouse litigation Banking facility commitment fees were reclassified to finance costs in 2018 Stable (1) Includes product marketing and promotion expenses 36

37 Net Investment Income Q1 2018: Total $379m; Q1 2017: Total $431m 2017: Total $1,599m Net Investment Income by Funds Funds Size ($ million) Corporate Funds Margin Funds Clearing House Funds ($ million; at 31 Dec) 21, ($ million) Cash & Bank Deposits Debt Securities Equities Collective Investment Schemes 17,670 58,143 68,703 Net Investment Income by Category of Investments 9,585 17, FX 74,099 83, Corporate Funds Margin Funds(HK) Margin Funds(LME) Clearing House Reserve Funds Net investment income for Q decreased by 12% versus Q mainly due to: (1) lower fair value gains of collective investment schemes (2) partly offset by higher net investment income on Margin Funds (39)

38 Drivers of Trading and Clearing Revenue Relationship between headline ADT and overall trading and clearing income is not linear Cash Equity Equity & Financial Derivatives Commodities Clearing ($ million) + 53% + 91% - 7% + 37% ADT ADT LME chargeable ADV ADT $58.1bn +95% $113.3bn $16.2bn +102% $32.8bn 607k +3% 628k $74.3bn +97% $146.1bn HKFE ADV SI , k 339k % 675k Stock Options ADV +96% 665k $183.7bn 1, , Q Q Q Q Q Q Q Q Trading fees and trading tariff Stock Exchange listing fees Clearing and settlement fees Depository, custody and nominee Market data fees Other revenue and sundry income Net investment income services fees 607k +63% $300.1bn LME chargeable ADV +3% 628k Trading fees & tariff from ADT Listing fees due to listed companies and IPOs Trading fees due to ADT of DWs, CBBCs & warrants, derivatives ADV Listing fees due to record quarterly newly listed DWs and CBBCs Trading fees from fee discounts on short-dated and medium-dated carries, which outweighed the impact of ADV Clearing fees due to HK ADT Net investment income due to Margin Funds and return One-off Lehman post-liquidation interest in Q

39 Trading and Clearing Transactional Revenue by Market Acquisition of LME in Dec 2012 LME Clear commenced operation since Sep 2014 LME fee commercialisation since Jan 2015 Strong growth of Derivatives Market Improved sentiment in Cash Market, but reduced volatility impacted derivatives traded on HKFE ADT $53.9bn $69.5bn $66.9bn $88.2bn Revenue $3,854m $5,758m $6,786m $7,547m 18% 1% 4% Cash 77% (1) 3% 12% 19% Cash 27% (1) (1) 66% 2% 17% Cash 54% 2% 15% 22% Cash 61% (1) Commodities HKFE Futures & Options, and OTC contracts Stock Options Fee diversification continues following acquisition of LME and with steady growth of Derivatives Market (1) Includes all products traded on the Cash Market platform (ie, equity products, DWs, CBBCs and warrants) 39