UPDATE 2-ASX profit up 2.7 pct, 2009 outlook cautious
(Adds comment, details, shares)
By Mette Fraende
SYDNEY, Aug 14 (Reuters) - ASX Ltd (ASX.AX), Asia-Pacific's second-largest listed stock exchange, posted a 2.7 percent rise in second-half net profit and joined its Hong Kong and Singapore rivals in predicting a challenging year ahead on weaker trading volumes and a drop in capital raisings.
Asian stocks, measured by the MSCI Asia excluding Japan index .MSCIAPJ, have fallen about 20 percent in the last three months, curtailing interest in share trading after a stellar 2007.
"In 2009 we think volumes will continue to soften, and will likely remain resonably weak. But the biggest risk for ASX is if there is an increase in corporate insolvencies, leading to a lower number of listings and therefore, lower listings revenue," portfolio manager at White Funds Management, Angus Gluskie said.
The value of initial public offerings in Asia ex-Japan fell 42 percent to $22.8 billion in January-June, according to Thomson Reuters data, denting earnings at bourses that depend on transaction fees to drive revenue.
Hong Kong Exchanges & Clearing (0388.HK), Asia's largest listed bourse operator, reported a 6 percent drop in quarterly earnings on Wednesday, with weaker trading volumes and investment income signalling a tough second half.
Last week, Singapore Exchange (SGXL.SI) announced a near-halving of its quarterly earnings as stock trading volumes fell, and warned that the outlook for markets remained volatile.
ASX said net profit for the six months to June was A$178.5 million ($156.6 million) versus A$173.8 million a year ago.
Full-year net profit was A$365.95 million, just above an average forecast for A$363 million on Reuters Estimates.
Shares in ASX were up 3.9 percent at 0228 GMT after the result, outperforming the benchmark S&P/ASX 200 index .AXJO which was up 2 percent, after offering some relief to the market.
"It's like a lot of companies through this reporting period. If there are no significant surprises or shocks, it's more a relief than anything else," said Shaw Stockbroking dealer Jamie Spiteri.
"Being very much exposed to the volatility attached to the financial markets in the last six to 12 months, there's always a cloud of uncertainty hanging over groups like the ASX. But they've basically delivered within the range, and we find their price has rallied based on the fact there's a bit more clarity out there," he said.
INSOLVENCIES A THREAT TO ASX
ASX also reported a substantial fall in IPOs during the year, which could be the group's biggest threat in the year to come.
"Topline revenue was slowing a bit more than we expected, and that leaves a question mark about the future and where revenue will go next year," Gluskie said.
For the year to end-June, average ASX daily trading turnover rose 21 percent, down from 36 percent growth in the previous year, while total capital raised fell by a fifth to A$62 billion.
ASX also faces intensifying competition as the Australian government reviews applications from companies such as AXE ECN, a joint venture including the New Zealand stock exchange (NZX.NZ), and European platform Chi-X to provide trading and settlement services.
ASX said its outlook for the group's 2009 performance was one of cautious optimism, and that its performance for the year would be linked to the duration of ongoing instability in global credit markets and the outlook for domestic economic growth and interest rate volatility.
ASX shares have dropped more than 42 percent this year, almost double the fall on the benchmark index. ($1=A$1.14) (Additional reporting by Sonali Paul; Editing by Dhara Ranasinghe and Jean Yoon)
