UPDATE 1-HKEx 2012 Q4 earnings lag as costs rise

Wed Feb 27, 2013 12:02am EST

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(Recasts lead to quarterly figures, adds details)

* Q4 net at HK$300 million vs HK$1.27 billion in Q4 2011

* 2012 net profit HK$4.1 billion vs HK$4.39 billion forecast

* Average daily turnover down 23 percent in 2012

HONG KONG, Feb 27 (Reuters) - Hong Kong Exchanges & Clearing Ltd, the world's biggest exchange operator by market value, posted a net profit of HK$300 million ($38.67 million) for the October-December quarter, worse than the HK$1.27 billion the exchange reported during the same time last year after it was hit by a fall in trading volumes and higher costs.

For the whole of 2012, HKEx said its net profit fell 20 percent to HK$4.1 billion, according to a statement. The company had been expected to post a net profit of HK$4.39 billion according to a Thomson Reuters I/B/E/S survey of 16 analysts.

"Our markets experienced a down year in 2012, both in terms of funds raised and turnover," HKEx Chief Executive Charles Li said in a statement. "That was mostly in line with other major markets around the world."

Average daily turnover - a key determinant of exchange income - fell 23 percent to HK$53.8 billion in 2012. A lack of high-profile public offerings in the fourth quarter also hurt the HKEx's revenues. In 2011 HKEx was the world's IPO leader.

To make up for the slowdown in equities trading, the exchange has been seeking new growth areas such as commodities and fixed-income, having paid $2.2 billion for the London Metals Exchange last year.

The move to diversify pushed up costs, with operating expenses up 13 percent to about HK$2 billion as the HKEx embarked on a number of high-profile hires such as its new chief operating officer, Henry Ingrouille.

The HKEx says it plans to develop Asian time-zone price discovery and clearing with its LME purchase, which would mark its most concrete effort yet to increase business from investors in the region. Other exchange operators in the region have also been trying to shift away from traditional equity settlements.

Singapore Exchange Ltd said in January its October-December net profit rose 17 percent, helped by a strong showing in its derivatives business.

($1 = 7.7585 Hong Kong dollars) (Reporting by Kelvin Soh; Editing by Matt Driskill)

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