HKEX INVESTOR PRESENTATION - Aug 2020 - HKEX Group
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Aug 2020 HKEX INVESTOR PRESENTATION
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.
2Agenda
1 Key Performance and Growth Drivers
2 Group Financial Update
3 Strategic Plan 2019-2021
4 China Connectivity
Appendix
5
Financial supplement
3HKEX – Leading Vertically Integrated Exchange Group
HKEX GROUP
Financials
FY2019 1H 2020
Leading diversified exchange group in the Asian Time Zone REVENUE: REVENUE:
HK$16.3bn HK$8.8bn
HK’s only exchange group EBTIDA: EBTIDA:
HK$12.3bn HK$6.7bn
World’s leading IPO venue – ranked #1 in 7 of the past 11 years PAT: PAT:
HK$9.4bn HK$5.2bn
Pioneer in Mainland capital markets connectivity EPS: EPS:
HK$7.49 HK$4.15
London Metal Exchange – globally leading base metals exchange DPS: DPS:
HK$6.71 HK$3.71
(90% payout) (90% payout)
Primary & Secondary Markets Post Trade Market Access
Equity & Financial
Cash Equities Commodities
Derivatives Post Trade Technology
Market Data
22% 18% 9% 5%
38%
2019
Revenue
Share1
Note: Figures for FY2019 (unless otherwise stated) 4
1. Corporate items accounted for 8% of total revenue in 2019 and are not shown on this slide.1H 2020 Key Highlights
Record half-yearly revenue and profit despite challenging macroeconomic backdrop with core
business revenue up by 13%YoY; total revenue up by 2%YoY and PAT up by 1%YoY
Record half-yearly Stock Connect revenue of HK$743mn (+46%YoY)
Net investment income fell $681mn, primarily due to the fair value losses of collective investment
schemes previously announced at Q1
Strong IPO Market – #2 globally in number of new company listing (64) and #3 in IPO funds
raised (HK$ 92.8bn)
Strong performance in Connect Schemes – all achieved half-yearly record high ADT
Major licensing agreement for MSCI Asia & EM indexes to offer suite of 37 new contracts, further
expanding HKEX product ecosystem
Ongoing market microstructure enhancements and technology capabilities enhancement
5Core Business Well-Positioned for Organic and Structural Growth
A Broad Product Ecosystem Attracting Diverse Mainland and International Investor Base
Securities ADT Derivatives ADV
CAGR Futures Options
(HK$ billion) (’000 contracts)
CAGR
+5.7%
Southbound Connect 1,204 Risk Management
107 125 +12.3% 1,068 1,210
106
88 87 869
Jumbo IPOs 768 762 Algo / Quant Investors
69 67
63
533 577
Global Investors After-hours Trading
3 3
2013
2014
2015
2016
2017
2018
2019
2013
2014
2015
2016
2017
2018
2019
2020
2020
YTD
YTD
B IPOs Driving ADT Growth C Transformational Growth from China’s Opening1
# of IPOs
Total IPO funds raised (US$ billion) Northbound ADT2 Southbound ADT2
Global fundraising rank New Economy Listing (RMB billion) (HK$ billion) Continuing Portfolio
#3 #2 #1 #1 #3 #1 #1 #3 Reforms Diversification
CAGR CAGR
120 218 250 • Biotech
183 87
100 174
200 •
+60.0% +33.5% A-share Inclusion in
138 126
WVR
80 88 Global Benchmarks
110 122 150 • Secondary Listings
23
60 13
30.0 33.9 25.2 36.6 40.1 100 10 11
40
21.8 17.1
Strong Pipeline of 6 5 20
42 SB Connect Limited by
16.4 50 Mainland and 10 3 4
20 Investor Eligibility Cap
0 3 0
International Listings 3 3
2016
2013
2014
2015
2017
2018
2019
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2020
2020
2020
YTD
YTD
YTD
D Focus on Revenue Growth and Cost Discipline
Source: HKEX, Dealogic. 6
1. Shanghai-HK and Shenzhen-HK Stock Connect was launched in Nov 2014 and Dec 2016 respectively.
2. Buy + Sell ADT.
3. 2020 YTD as of Jul 2020.A Diverse International Investor Base Attracted to Broad Product Ecosystem
Algo / Quant Participation in Cash Market
Stock Due to…
Options Stock
Short Futures Relatively low • Presence of stamp duty
Selling (circa. 10-20% of ADT) • Minimal high frequency trading
• Single market structure
Stock
CBBCs Connect
Algo / Quant Participation in Derivatives Market
A-share
DWs Derivatives1 Driven by…
Stocks • No stamp duty
Relatively high
(circa. 30-40% of ADV) • Market maker participation
• Capital efficiency
OTC Bond
Connect
Recent initiatives and future focus
Index Asia & EM Market microstructure enhancements: leading to better price
Futures Index Futures2 discovery and trade efficiency
ETPs Currency
Futures Targeted marketing and client support: onboarding 10+ clients
each year
Incentives: driving increased volumes
Product cross-selling: creating arbitrage opportunities
1. HKEX signed a licence agreement with MSCI to introduce futures contracts on the MSCI China A Index, subject to regulatory approval and market conditions. 7
2. HKEX signed a licence agreement with MSCI to introduce 37 futures and options contracts in Hong Kong based on a suite of indexes in Asia and Emerging Markets, subject to regulatory approval and
market conditions (33 already launched in Jul and Aug 2020).A New MSCI Suite - Growing Product Ecosystem to Connect Global Trades
Internationalising Hong Kong’s Product Offering Key Dynamics
Index NTR Index
Futures Futures
MSCI Australia Net Total Return (USD) √ Expanding our product UNDERLYING
MSCI China Free (USD) √ √
MSCI Emerging Markets (USD) √ √ licenced a suite of MSCI indexes in Asia and Emerging
MSCI EM ex China Net Total Return (USD) √ Markets to introduce 37 futures and options contracts
MSCI EM ex Korea Net Total Return (USD) √ (33 already launched as of Aug 2020)
MSCI EM Asia Net Total Return (USD) √
MSCI EM Asia ex China Net Total Return (USD) √
MSCI EM Asia ex Korea Net Total Return (USD) √
MSCI EM EMEA Net Total Return (USD) √
MSCI EM LatAm Net Total Return (USD) √
MSCI Hong Kong Net Total Return (USD) √ Broadening and deepening LIQUIDITY
MSCI India (USD) √ √
Allow investors to Trade Asia, in Asia
MSCI Indonesia Index (USD) √ √
MSCI Japan (JPY) √ √ Complement existing HSI and HSCEI index futures
MSCI Japan Net Total Return (USD) √
MSCI Malaysia (USD) √ √
MSCI New Zealand Net Total Return (USD) √
MSCI Pacific Net Total Return (USD) √
MSCI Pacific ex Japan Net Total Return (USD) √
MSCI Philippines (USD) √ √ Enhancing our COMPETITIVENESS
MSCI Singapore Free (SGD) √ Better capital efficiency
MSCI Singapore Free Net Total Return (USD) √
MSCI Singapore Net Total Return (USD) √ Creating a competitive one-stop shop for China and
MSCI Taiwan (USD)* √ √ Asian exposures
MSCI Thailand (USD) √ √
MSCI Vietnam (USD) √ √
Reinforces Hong Kong’s role as the leading global market in the Asian Time Zone
* Also include MSCI Taiwan (USD) Index Options
8A ETP – A Growing Contributor along with Market Structure Enhancements
ADT 1
$7.1B
2020
$5.0B ADT
CONTINUOUS QUOTING AND
2019 NEW SPREAD TABLE (JUN)
DESIGNATED SPECIALISTS
$4.5B ADT
2018
INTRODUCE ICSD SETTLEMENT A-SHARE L&I PRODUCTS (JUL)
MODEL
ACTIVE ETFS
-2X INVERSE PRODUCTS
MARKET MAKER
OFC STAMP DUTY EXEMPTION (AUG)
MARKET MAKER BUY-IN
STRUCTURE
EXEMPTION
GREATER DEEPENED LOWER IMPROVED
PRODUCT DIVERSITY LIQUIDITY POOL TRADING COSTS MARKET QUALITY
Our aspiration is to become Asia’s ETP Marketplace
1. YTD Data from 1 Jan 2020 to 30 Jun 2020 9B Strongly Performing IPO Market boosted by New Economy Issuers and
Secondary Listings
2020 Jan - July Fundraising Summary
…raising
HK$132.1bn
IPO Funds Raised
22 New Economy
(#3 globally)
& Biotech Companies Listed… HK$94.8bn
+56%YoY +212%YoY
IPO Funds Raised by Segments
No. of IPO
– Total 174 218 183 88 World’s second-largest fund raising hub for
– New Economy1 biotech companies
– Biotech 2
14 27 38 16
0 5 9 6 Dialogue with the Biotech Community 2020
webinar series with PhiRDA - attracted 292,000+
IPO Funds Raised
(HK$ bn)
views
314.
288. HKEX Biotech Week 2019 – attended by 1,000+
300 scientists, biotech entrepreneurs, investors,
technology experts and policymakers
200 Ongoing listing reforms
128.5 132.1
Shortening of IPO settlement cycle
100
Enhancing listing regime for overseas issuers
Enhancing the bookbuilding and price discovery
0
2017 2018 2019 2020 YTD aspects of IPOs (cornerstone investors, pricing
Others Biotech New Economy
flexibility, clawback mechanism)
Source: Dealogic, as of July 2020.
1. Include Non-18A Biotech companies 10
2. Only include Chapter 18A Biotech companiesB Jumbo IPOs Contributing to Increased Trading Activity
14 Jumbo IPOs > US$1bn (HK$7.8bn) since Jan 2018 Rising contribution to volumes from Jumbo IPOs
Cash Market ADT (HK$ bn) contributed
IPO size by the Jumbo IPOs and related Structured Products ADT
Rank Company name IPO date
(HK$bn)
% of respective ADT
1 Alibaba Group - SW 26/11/2019 101.20 13.3%
% of single stock option ADV
2 China Tower - H 08/08/2018 58.80
3 Budweiser Brewing APAC 30/09/2019 45.08 16.1%
4 Xiaomi Corporation - W 09/07/2018 42.61
7.3%
5 Meituan Dianping - W 20/09/2018 33.14
20.1
6 JD.COM - SW 18/06/2020 34.56
7 Netease - S 11/06/2020 24.26 10.5%
1.3%
8 ESR Cayman Ltd. 01/11/2019 14.06
9 Shenwan Hongyuan - H 26/04/2019 9.09
10 Hansoh Pharmaceutical Group 14/06/2019 9.04 3.0% 9.2
Topsports International
11 10/10/2019 9.01
Holdings
Ping An Healthcare and
12 04/05/2018 8.77
Technology 3.3
13 Jiangxi Bank - H 26/06/2018 8.60
14 WuXi AppTec - H 13/12/2018 8.28
2018 2019 2020 YTD
In 2020, 16% of cash ADT and 13% of stock option ADV is contributed by the top 14 IPOs over the last 2.5 years
Source: HKEX, as of Jul 2020. 11
Ranked by IPO size.C Transformational Growth from China’s Opening
Stock Connect1 Bond Connect
Northbound Southbound Total Foreign Participation in CIBM 2
(RMB billion) (HK$ billion) (RMB billion) Investors
Foreign Holdings in Chinese Bonds
Foreign
Onboarded
Portfolio Value Portfolio Value
(US$ bn)
Ownership (%)
500 2.8%
3.0% >2,060
Bond Connect
CAGR
CAGR launch 2.5%
1,951 400 US$382bn
+77.3% 2.0%
+84.0% 1,536
1,429 300
1,138 1.5%
927
789 YTD ADT
668 200
531 1.0%
364
RMB19.8bn
100 0.5%
125 186 115
3
0 0.0%
2020
2019
3 3
2015
2016
2017
2018
2015
2016
2017
2018
2019
2020
Continuing portfolio diversification by Mainland and Inclusion of Mainland bonds into global fixed income
international investors indices
Inclusion of A shares into major global benchmarks Easier access to the Mainland bond market via more
trading platforms
Increasing selection of new economy companies in
Southbound Stock Connect Increasing use of RMB globally and need to reinvest
into RMB assets
Benefiting from the increased capital flow into and out of Mainland China,
in particular inbound flows driven by international index inclusions
Source: HKEX, Bond Connect, ChinaBond, SCH;
1. Shanghai-HK and Shenzhen-HK Stock Connect was launched in Nov 2014 and Dec 2016 respectively. 12
2. Foreign participation in CIBM was first allowed in 2010 when the PBOC rolled out a Pilot Scheme to allow foreign financial institutions to invest in CIBM.
3. Data as of Jul 2020 (unless otherwise specified).D Focus on Revenue Growth and Cost Discipline
2013-2016 2016-2019
ADT re-rating
Stock Connect – Shanghai
Stock Connect – Shanghai + Shenzhen
After-hours trading
Continuing growth in derivatives
LME fee commercialisation
Listing reforms and new economy issuers
Launch of LME Clear
Revamped investment income approach
Revenue (HK$ million) EBITDA (HK$ million)
EBITDA
68% 70% 75% 69% 73% 74% 75%
Margin
CAGR +13.6%
+8.4%
15,867 16,311 CAGR +17.0%
13,375 13,180 +8.8%
11,116 11,757 12,263
9,849 10,085
8,723 9,614
6,891 7,661
5,946
2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019
Reaping rewards from the structural growth initiatives that have already been implemented
13D Focus on Revenue Growth and Cost Discipline
2013-2016 2016-2019
Reaping rewards of past investments and
Investment in growth initiatives to capture benefiting from operating leverage
China opportunities
Increased cost discipline
Upgrading core infrastructure to strengthen
technological foundation Investment in automation and operational
efficiency
Operating Expenses (HK$ million) Profit Attributable to Shareholders (HK$ million)
Net Profit
52% 52% 59% 52% 56% 59% 58%
Margin
CAGR +5.4%
+7.6% CAGR
4,110 +17.6%
4,048
3,455 3,566 +8.2%
3,290
2,777 2,958 9,312 9,391
7,956 7,404
5,165 5,769
4,552
1
2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019
Increased operating leverage from revenue growth, delivered by structural drivers combined with opex discipline
1. If the impact of HKFRS 16 were excluded, 2019 Operating Expense would be HK$4,362 million and the 2016-2019 CAGR would be 8.1%. 14Continued focus on Organisational Excellence and Corporate Sustainability
Progressing our financial markets and communities for the benefit of all
TALENT RISK ENGAGEMENT REPUTATION CULTURE
OUR MARKETS OUR PEOPLE OUR OPERATIONS
Update of ESG Reporting Guide Official launch of HKEX Foundation with Enhanced Risk, Operations,
with online training materials flagship $20 million Charity Partnership Communications and Continually Policy
Programme
Active involvement in global ESG Newly launched ‘paper reduction’
standardisation consultations New university scholarship programme programme as part of HKEX Green
to support home-grown talents Month
New ‘Sustainable Finance’ MD
appointment to lead commercial COVID-19 HK$10m relief fund through HKEX Future Workplace Programme
sustainability proposition HKEX Foundation in HK, China and UK
Launch of new CSR website
Announcement of HKEX STAGE, Enhanced Diversity & Inclusion efforts
the first-of-its-kind sustainable and e.g. FT Women in Business Programme, Awarded Sustainability Leader status in
green finance information platform CarER partnership and HKUST MBA S&P Global’s Sustainability
in Asia “Diversity in Business” course Yearbook 2020 and Bloomberg Gender
sponsorship Equality Index
15Agenda
1 Key Performance and Growth Drivers
2 Group Financial Update
3 Strategic Plan 2019-2021
4 China Connectivity
Appendix
5
Financial supplement
161H 2020 Key Financial Highlights
Record half-yearly revenue and profit
Strong core business performance; market conditions impacted investment income
(HK$)
Total revenue & other income Core business revenue Net investment income
+2% +13% -45%
$8.6bn $8.8bn $7.1bn $7.9bn $1.5bn $0.8bn
1H 2019 1H 2020 1H 2019 1H 2020 1H 2019 1H 2020
EBITDA PAT Basic earnings per share
+1% +1% -0%
$4.16 $4.15
$6.6bn $6.7bn Dividend per share2
1H 2019 1H 2020 $5.2bn $5.2bn
Margin -0%
1H 2019 1H 2020
77% 76% $3.72 $3.71
1H 2019 1H 2020
1. % is computed based on amounts reported in financial statements.
2. The 2020 first interim dividend will be payable in cash, without a scrip alternative.
17
3. Does not add up due to roundings.1H 2020: Record Half-Yearly Revenue and Profit
Revenue and Operating Profit attributable to HKEX
income EBITDA Basic earnings per share
other income expenses (1) shareholders (2)
(HK$ mn) (HK$)
Core business+NII Core business+NII Core business+NII Core business+NII
+ 2% + 6% + 1% + 1% - 0%
Core business Core business Core business Core business
+ 13% + 15% + 19% + 18%
ADT
77% Margin 76%
HK$97.9bn +20% HK$117.5bn
8,578 8,782
NII 838
NII 1,519
6,625 6,706
NII 838
NII 1,519 5,205 5,233
NII 838 4.16 4.15
Core business NII 1,519
Core business 7,944 NII 0.66
NII 1.21
7,059 Core business
1,953 2,076 Core business 5,868 Core business
5,106 Core business 4,395 Core business
3,686 Core business
3.49
2.95
1H 2019 1H 2020 1H 2019 1H 2020 1H 2019 1H 2020 1H 2019 1H 2020 1H 2019 1H 2020
Trading & clearing fees from Staff costs from HC mainly EBITDA margin 1% PAT % similar to EBITDA EPS due to shares issued for
ADT and record Stock Connect from BayConnect acquisition & scrip dividends
revenue payroll adj
Listing fees from record newly IT costs from new IT systems
listed CBBCs and network upgrade
Net Investment income (NII) Professional fees from
due to HK$138mn losses from strategic projects and business
external portfolio in 1H 2020 (vs initiatives
HK$535mn record gains in 1H
2019)
1. Excludes depreciation and amortisation, finance costs, and share of profits/(losses) of joint ventures
2. For the purpose of this presentation, tax impact of NII is not considered when calculating the PAT attributable to NII. 18Q2 2020: Quarterly Record High Due to Rebound of External Portfolio and
Seasonality
Profit attributable to
Revenue and other income Operating expenses (1) EBITDA
HKEX shareholders (2)
(HK$ mn)
Core business+NII + 3% Core business+NII Core business+NII
+ 19% + 25% + 31%
Core business Core business Core business
- 4% - 6% - 10%
ADT
74% Margin 78%
HK$120.9bn - 6% HK$114.0bn
4,773
4,009 NII 885
3,722
2,984 NII 885 2,971
2,262 NII 885
Core business Core business
4,056 3,888 Core business Core business
1,025 1,051 3,031 2,837 Core business Core business
2,309 2,086
NII (47) NII (47) NII (47)
Q1 2020 Q2 2020 Q1 2020 Q2 2020 Q1 2020 Q2 2020 Q1 2020 Q2 2020
NII due to rebound of external portfolio Stable opex due to stringent cost control EBITDA margin 4% PAT % higher than EBITDA due to one-
(Q2: HK$383mn gains; Q1: HK$521mn off deferred tax charge in Q1 2020
losses)
Depository, custody and nominee service
fees due to seasonality
Partly offset by:
Trading and clearing fees from
ADT & ADV
1. Excludes depreciation and amortisation, finance costs, and share of profits/(losses) of joint ventures
2. The tax impact of NII is not considered when calculating the PAT attributable to NII. 19Higher Revenue across All Business Segments, Offsetting External Portfolio
Loss of HK$138mn (versus a Record Gain of HK$535mn in 1H 2019)
Segmental revenue
(HK$ mn)
390 7 55 367 70 8,782
8,578
(685)
+21% +0% +8% +11% +19% -91% +2%
YTD
1H Q2 2019
2019 Cash Equity Equity and Commodities Post Trade Technology Corporate Items YTD
1HQ2 2020
2020
Financial
Derivatives
Trading fees & tariffs Trading fees & tariffs Trading fees Clearing fees Network fees NII of Corporate
% from ADT of from DWs, CBBCs & from LME fee from ADT & SI, due to usage of Funds from external
equity products, warrants from increase record Stock the Orion Central portfolio (HK$138mn
Change trading days, and ADT Connect clearing Gateway and China losses in 1H 2020 vs
year-on-year record Stock revenue and LME Connect Central HK$535mn record
Connect trading Trading fees from Clear fee increase Gateway by EPs gains in 1H 2019)
revenue futures and options
from proportion Accommodation Hosting services
of higher fee income due to fees due to
contracts traded JPY & EUR subscriptions
collateral by CPs in
Listing fees due to HK and USD
record half-yearly investment return of
newly listed CBBCs LME Clear fell below
benchmark
1. Headline ADT up 20% (1H 2020: HK$117.5bn; 1H 2019: HK$97.9bn); ADT of cash equity up 33% (1H 2020: HK$100.0bn; 1H 2019: HK$75.1bn); ADT of DWs, CBBCs and warrants included under equity and
financial derivatives down 23% (1H 2020: HK$17.5bn; 1H 2019: HK$22.8bn) 20Resiliency and Performance reflected in EBITDA
Equity & Financial Group Total
Cash Equity Commodities Post Trade Technology
Derivatives (incl. Corp. Items)
(HK$ mn)
+ 26% - 1% +14% + 12% + 12% + 1%
% EBITDA Margin
77% 76%
Share of Group EBITDA 6,625 6,706
% (before Corporate Items)
84% 87% 82% 81% 53% 56% 87% 88% 73% 69%
3,197
2,842
1,968 100% 100%
1,561
1,340 1,331 370 420
271 304
24% 27% 21% 19% 6% 6% 45% 44% 4% 4%
1H 2019 1H 2020 1H 2019 1H 2020 1H 2019 1H 2020 1H 2019 1H 2020 1H 2019 1H 2020 1H 2019 1H 2020
Trading fees & tariffs from Trading fees & tariffs from DWs, Trading fees from LME Clearing fees from ADT Network fees due to Overall EBITDA margin
ADT of equity products, CBBCs & warrants from fee increase & SI, record Stock Connect usage of the Orion Central 1% due to fair value losses
trading days, and record ADT clearing revenue and LME Gateway and China Connect on external portfolio of
Opex due to IT
Stock Connect trading Trading fees from futures and
maintenance expenses, Clear fee increase Central Gateway by EPs HK$138mn (vs record gains
revenue options from of HK$535mn in 1H 2019)
proportion of higher fee partly offset by marketing Other revenue from Hosting services fees due
Opex due to lower contracts traded expenses accommodation income to subscriptions
allocated costs of Listing Opex due to staff costs Opex due to inclusion of
Listing fees due to record half-
division due to proportion from payroll adjustment
yearly newly listed CBBCs BayConnect opex (1)
of listing fees from equities
Opex due to higher allocated
costs of Listing division due to
listing fees from DWs and
CBBCs
1. The acquisition of BayConnect was completed in June 2019 and its opex is included under Technology segment. 21Investment Income – External Portfolio Impacted by Broader Market; Income
from Internal Funds Held Up Well
1H 2020: HK$838mn (1H 2019: HK$1,519mn) Average fund size
Income from Internal Funds in line YoY despite increase in margin (HK$ bn)
rebates to participants
Average Margin Fund and Clearing House Fund sizes increased 197.3
169.0 29.3
due to heightened volatility in 1H 2020 (in particular March) Corporate Funds
26.7
Margin Funds
Net investment income by funds
151.7
130.1 Clearing House
(HK$ mn) Funds
Corporate Funds Corporate Funds Margin Clearing 12.2 16.3
(External Portfolio) (Internal) Funds House Funds
1H 2019 1H 2020
729 714
535 Net investment income by category of investments
(HK$ mn)
210 204
Cash & Collective
45 58 Debt
bank investment FX
securities
deposits schemes
923 982
(138)
535
55 32
6
(38)
(138)
1H 2019 1H 2020 1H 2019 1H 2020 1H 2019 1H 2020 1H 2019 1H 2020 1H 2019 1H 2020 1H 2019 1H 2020 1H 2019 1H 2020 1H 2019 1H 2020
22External Portfolio – Annualised Return of 5.1% since Inception
Point of Injection / Redemption Cumulative gain since inception (HK$ mn)
3000 600
MSCI World 2017: 2018: 2019: 1H 2020:
1,400
Return (Net): +23.4% -8.6% +27.1% -6.3% 580 1,321
HK$3.3bn 560 1,200 1,183
2500 redemption(2)
HK$2bn
injection(1) 540
HK$6bn
injection
1,000
520
800
800
2000 500
638
480 600 532
460
1500 400
440
200
420
1000 400 0
2016 2017 2018 2019 1H
2020
MSCI World Index Bloomberg Barclays Global Agg Bond Index
As the market rebounded in Q2 2020, the external portfolio partially recovered from the Q1 2020 loss,
resulting in a cumulative gain of $1.2bn or an annualised return of 5.1% since inception.
1. HKEX added HK$2bn to the portfolio during the period from Q4 2018 to Q2 2019.
2. HK$3.3bn was redeemed in 1H 2020. 23Agenda
1 Key Performance and Growth Drivers
2 Group Financial Update
3 Strategic Plan 2019-2021
4 China Connectivity
Appendix
5
Financial supplement
24Our 2019-2021 Strategic Vision
The Global Markets Leader in the Asian Time Zone –
Connecting China, Connecting the World
China Global
Liquidity Liquidity
China Global
Markets Markets
China Global
Underlying Underlying
China Anchored Technology Empowered Globally Connected
Facilitating China’s Leveraging new technology Bringing global liquidity
internationalisation and for modernisation and to China and Asia Pacific
investment diversification growth underlying
25Strategic Plan 2019-2021
CHINA ANCHORED
Key Objectives Achievements to Date
MSCI China A Futures: signed agreement with MSCI,
pending regulatory approval
1 Expand Northbound capital inflows Stock Connect: inclusion of Xiaomi and Meituan Dianping
in Southbound; announced inclusion arrangements of
A+H companies for STAR companies
2 Expand Southbound capital Corporate WVR: market consultation launched on
Corporate WVR Beneficiaries
allocation
Southbound investor ID: launched in Jan 2020 to facilitate
orderly operation and regulation of Stock Connect
Expand post-trade
3
infrastructure
Northbound Master SPSA: launched in Jul 2020 to
facilitate more efficient pre-trade checking of Northbound
sell orders and average pricing execution at the fund
manager level
Bond Connect: addition of Bloomberg as second access
platform; >2,050 investors onboarded; market
infrastructure enhancements
QME: introduced 5 products within first year of launch;
licenced to launch natural gas products in Jun 2020
26Strategic Plan 2019-2021
GLOBALLY CONNECTED
Key Objectives Achievements to Date
Cash Market: expansion of closing auction session; launched
Volatility Control Mechanism (VCM); enhancements to Pre-
opening Session (POS) to be implemented in Q4 2020
1
Enhance our product ecosystem Derivatives Market: after-hours trading extended to 3am;
MSCI Asia & EM Index futures & options; enhanced block
across asset classes trade facilities; more new stock options
Improve our market
ETP market structure: cross-listing link with Euroclear;
buy-in exemption; new spread table and continuous
2 quoting market making; waiver on stamp duty on stock
microstructure
transfers for ETP market markers
3
Expand our international footprint ETP product suite: launched first active equity ETF, -2x
Inverse ETP, iron ore futures ETF, commodity-based L&I
further Product, A-share L&I Product
Derivatives & structured products: Inline Warrants; Weekly
Index options; Indian Rupee Currency Futures
Commodities: 6 gold indexes and USD London Metal Mini
Futures for 6 base metals in HK; 7 new cash-settled metals
futures on the LME; USD and CNH Silver Futures launched
in Jun 2020; LME launched new rules to optimise
warehousing network
IPO regime: ongoing initiative to shorten IPO settlement
cycle; Alibaba paperless IPO (T+4 settlement)
International listings: Budweiser APAC and ESR Cayman 27Strategic Plan 2019-2021
TECHNOLOGY EMPOWERED
Key Objectives Achievements to Date
Core enhancements: Derivatives market platform upgrade;
new Stock Connect trading system (OTP-CSC)
1 Modernise core systems
Client Connect: phase 1 rollout; Initiating phase 2 for
further digitisation on multiple processes and forms
Operational efficiency: continue to progress on delivery of
2 Leverage new technology robotic process automation across divisions; shortened
the listing cycle of structured products
Technology resources: 51% acquisition of BayConnect
3 Expand our horizons (Ronghui Tongjin); launched ‘Aiden’, HKEX’s first virtual
assistant
Virtual bank: Fusion Bank received HKMA licence, in
preparation for launch in 2020
Data strategy: minority investment in Huakong TsingJiao
282019-2021 Strategy – FICC Themes
FIXED INCOME AND CURRENCY COMMODITIES
Facilitate CNY access Expand product suite
Enhance Bond Connect Pricing evolution
Expand suite of offshore rates / FX
Mainland China warehouses
derivatives on onshore underlying
Build post-trade infrastructure
Commodity Connect
(custody, settlement, collateral management, FX)
29Key Components of Our FIC Strategy
Bond Connect enhancements
Expand Existing Platform Listed bonds and derivatives
Southbound Bond Connect
CNY accessibility – repository, tracking and monitoring
Capture CNY Opportunities IRS and repo + Derivatives Connect
CNY trading platform
Custody, settlement and collateral management
Invest in Post-Trade Infrastructure Trade repository and monitoring
International linkages
30LME Group Integration Process Complete…
Commercialisation
Post-acquisition Strategic pathway, future
of the platform
integration and platform development and
with LP and new
LME Clear launch revised fee structure
trader programme
ADV (‘000 lots) 22 Sep 2014
6 Dec 2012 LME Clear
1,000 HKEX Launch
acquisition
800
730
700 697
676 670 668
634 619 624
584
600
475
400
200
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 1H
Source: LME data as of Jun 2020 31
1. Excluding Admin Trades, 2020 YTD: 622,435 lots.…and LME Strategic Development on Track
Market leadership
• Promoting the highest standards of fair and orderly trading on the LME’s market
• Delivery of off-warrant stock reporting to provide better industry-wide metals stock transparency
• Opening a market discussion as to acceptable practices for commodities trading going forwards
Strategic Pathway Continued innovation
• Continuing the success of the Strategic • Significant investment in new trading platform
Pathway • Supporting industry initiatives to enhance
• New contracts continue to build liquidity, security of off-warrant metal storage
especially across ferrous suite • Investigating solutions to enable the spot
• 2020 prioritisation of electronic options market trading and sourcing of specific metal types
to simplify and standardise areas of its market • Insourcing warrant depository to streamline
structure the warrant lodgement and withdrawal
process, and provide significant operational
efficiencies
Sustainability focus
• Continued embedding of responsible sourcing requirements into the LME brand lists, ensuring that LME
brand listing is a clear indicator of good ethical standing
• Launch of 2020 sustainability strategy proposals to reflect market interest in broader sustainability story
with a focus on low carbon aluminium
32Agenda
1 Key Performance and Growth Drivers
2 Group Financial Update
3 Strategic Plan 2019-2021
4 China Connectivity
Appendix
5
Financial supplement
33The Penetration Level of Equity Market through Stock Connect
% of domestic market included in Stock Connect Stock Connect Coverage
(% of all Mainland & HK listed companies)
MUTUAL MARKET
By SSE 80%
Market 85% 78%
of total market cap
Cap SZSE 81%
SSE 70%
By
89% 70%
Turnover of total turnover
SZSE 64%
SSE 36% 579
By 29%
475 19% of total number of
Number
SZSE 32% 706 companies
Stock Connect covers the majority of the market by market cap and turnover
Source: Wind, HKEX
1. Data as of Jun 2020. 34Stock Connect – Trading Trends
Stock Connect generated record revenue of HK$743m in 1H 2020, 46% higher than 1H 2019
(Full Year 2019: HK$1,009m)
Stock Connect Average Daily Trading Volume (HK$ billion)
Shenzhen Southbound Shenzhen Northbound (1) Total average daily trading volume
Shanghai Southbound Shanghai Northbound (1) Percentage of Southbound turnover of Hong Kong Market
NB record of SB record
RMB191.2bn on of HK$60.2bn
7 Jul 2020 on 6 Jul 2020
10.9%
9.1% 202.1 11.00%
9.0%
200 9.0%
8.7% 8.0% 17.2 9.00%
7.9%
7.3% 18.9
6.8% 6.4%
6.1% 5.8% 7.00%
5.7% 6.1%
150 5.3% 5.4% 5.6%
4.8% 4.8%
3.7% 3.9% 118.6 5.00%
106.3 93.7
2.2% 2.3% 8.3 10.2
1.7% 114.8 91.9 3.00%
100 1.4% 1.3% 84.7 12.3 15.6 89.2 9.7
0.8% 10.5
8.0 8.6
67.5 6.8
10.1 11.2 1.00%
57.4 56.8 9.6
3.8 52.8 53.9 52.9
6.8 51.3
43.6 4.3 4.3 -1.00%
50 34.4 7.5 3.6 6.9 37.0 40.9 42.2
30.6 6.5 32.0 26.6 6.3
21.6 3.0
37.8
5.0 21.1 23.9 72.3
19.2 17.9
4.0 8.0 3.7 13.2
5.3 21.4
10.7 10.9 13.5
2.6 9.1 6.2 -3.00%
7.9 7.4 6.9 6.4 6.0 8.6 1.5 1.1 11.0 9.7 10.8
10.1 31.3 40.3 39.8 34.9
- 2.8 0.5 6.7 7.9 7.7 24.6 30.3 21.4 21.6 30.2 29.8
1.4
- 11.8 - 1.9 2.4 2.9 5.0 4.5 4.0 6.0
4.8
2.2 13.8 12.4 15.3
13.8
6.5 7.9 -
5.1 -
4.0 -
3.1 -
3.6 1.7
4.2 5.7 6.2
4.2 9.8
0 -5.00%
1Q 15 2Q 15 3Q 15 4Q 15 1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17 1Q 18 2Q 18 3Q 18 4Q 18 1Q 19 2Q 19 3Q 19 4Q 19 Jan 20 Feb 20 Mar 20 Apr 20 May 20 Jun 20 Jul-20
Stock Connect Northbound and Southbound Trading ADT reached RMB74.3bn and HK$20.7bn in 1H 2020
Stock Connect revenue continued to set record highs, reaching 8 per cent
of the Group’s total revenue and other income in 1H 2020 (1H 2019: 6 per cent)
Source: HKEX, SSE and SZSE as of 31 Jul 2020
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. 35
2. Does not add up due to roundingsStock Connect (Northbound)
Average Daily Turnover Portfolio Value
RMB billion RMB billion
1,952
124.3
MSCI
1,687
rebalancing 2020
days
1,518
2019
1,437 1,439
1,429
1,450
86.7
84.3
1,298 1,160
77.3 1,264
1,054 1,221
1,050
1,094
1,033 1,043
951 932
2018
785
41.7
686 698 719 2017
662 680 679 668
34.7 601 621
31.7 576 566 592
502 530
491
20.4 437
404
347 366
301
9.6 253 270
233
4.7 202
2016 2017 2018 2019 2020 31 May 31 Aug 28 May 27 Aug 26 Nov Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
YTD 2018 2018 2019 2019 2019
Source: HKEX 36
1. Data as of Jul 2020.Index Futures on China Underlying
ADV (’000 contracts)
Hang Seng Index Futures (50)3 HSCEI Futures (50)3
WEIGHTING COMPOSITION1 NOTIONAL VALUE1 NOTIONAL VALUE1
55% 45% US$156k US$62k
234
MAINLAND CHINA OTHER 209 159
186 152
135 134 139
131 117
127
86 89
85 94 83 80 86 65
69 50 61
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
YTD YTD
Trading Fee: HK$10.00/contract, 0.0007% to notional value Trading Fee: HK$3.50/contract, 0.0006% to notional value
FTSE China A50 Index Futures (SGX) (50)3 CSI 300 Index Futures (CFFEX) (300)3
NOTIONAL VALUE1 NOTIONAL VALUE1
US$14k US$176k
369 391 385 1,136
339
884
270 260 812
159 432
84 251 207
39 31 96 106
2 12 17 17
2
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
YTD YTD
Trading Fee: US$0.80/contract, 0.0056% to notional value Trading Fee: RMB27.78/contract, 0.0023% to notional value
Source: HKEX, SGX, CFFEX, FIA 37
1. As at Jun 2020.
2. CSI 300 Index Futures was launched in Apr 2010.
3. Numbers in brackets represent the number of constituents within the underlying index.Tapping into China’s Vast Bond Market
China’s Bond International
Market Investors
Key Policy Drivers
Outstanding,
US$39tn US$ tn Relative to GDP
• Risk migration from banking sector to bond market
50 201%
• Greater credit differentiation amid ongoing market
reforms
25 96% 247%
205% 163%
• Funding needs for economic transition and
infrastructure projects – e.g. Belt & Road; Panda
0
US China Japan UK FR
bonds
• Enhanced bond issuance and disclosure standards
US$13tn Growing International Demand
• Yield differential against developed markets
US$6tn
• Inclusion in emerging market bond indexes
• Geographical and asset class diversification
Bank Assets Equities Bonds
• Growing convertibility of RMB / SDR inclusion
• More efficient access – Bond Connect
Source: CBIRC (Mar 2019), World Bank, PBOC, BIS, IMF 38Bond Connect Has Significantly Grown Foreign Participation in China’s Bond Market
Bond Connect Jul 2020 YTD ADT: RMB 19.8bn
(1)
Foreign Participation in the CIBM Growth Drivers
Foreign Holdings in Chinese Bonds Foreign Ownership (%)
(US$ billion) Inclusion of Mainland bonds in global fixed income
indexes (6% of Bloomberg index weighting by 2020)
RQFII QFII Long-only
500 investment investment investment 3.0% Greater adoption of RMB globally and
Bond 2.8% need to reinvest in RMB assets
Pilot scheme
Connect
to access
launch
CIBM 2.5%
400 Improving access to the Mainland bond market
US$382bn
2.0%
300 Foreign Ownership %
68%
64%
1.5%
Achievable
200 target
46%
1.0% 41% 39% Average: 38.5%
38% 15%
29%
100
0.5%
13%
8%
~2%
0 0.0%
(1)
DE FR AU UK IT CA US RU JP China
Foreign participation in the CIBM increased by 217% since launch of Bond Connect in July 2017(1)
Number of Bond Connect participants has grown to 2,068 as of Jul 2020
Source: ChinaBond + SCH, Bloomberg, BIS 39
1. Foreign participation in the CIBM data as of Jul 2020Agenda
1 Key Performance and Growth Drivers
2 Group Financial Update
3 Strategic Plan 2019-2021
4 China Connectivity
Appendix
5
Financial supplement
40Financial Highlights – Income Statement
% of Revenue & % of Revenue &
(HK$ mn, unless stated otherwise) 1H 2020 1H 2019 YoY Change
Other Income Other Income
Results
Revenue and other income 8,782 100% 8,578 100% 2%
Operating expenses (2,076) (24%) (1,953) (23%) 6%
EBITDA 6,706 76% 6,625 77% 1%
Depreciation and amortisation (545) (6%) (495) (6%) 10%
Operating profit 6,161 70% 6,130 71% 1%
Finance costs and share of profits less losses of
(57) (1%) (80) (1%) (29%)
joint ventures
Profit before taxation 6,104 70% 6,050 71% 1%
Taxation (870) (10%) (847) (10%) 3%
(Profit)/loss attributable to non-controlling interests (1) (0%) 2 0% N/A
Profit attributable to HKEX shareholders 5,233 60% 5,205 61% 1%
Capex 519 368 41%
Basic earnings per share HK$4.15 HK$4.16 (0%)
Headline ADT on the Stock Exchange HK$117.5 bn HK$97.9 bn 20%
1. % does not add up due to roundings.
41Performance by Operating Segment
Equity &
Cash Post Corporate Group Group
HK$ mn Financial Commodities Technology
Equity Trade Items 1H 2020 1H 2019
Derivatives
Revenue and other income 2,253 1,638 749 3,629 443 70 8,782 8,578
% of Group Total 26% 19% 8% 41% 5% 1% 100% 100%
Operating expenses (285) (307) (329) (432) (139) (584) (2,076) (1,953)
EBITDA 1,968 1,331 420 3,197 304 (514) 6,706 6,625
% of Group Total (1) 29% 20% 6% 48% 5% (8%) 100% 100%
EBITDA margin 87% 81% 56% 88% 69% N/A 76% 77%
Depreciation and amortisation (60) (51) (169) (106) (22) (137) (545) (495)
Finance costs (7) (6) (4) (46) (1) (32) (96) (86)
Share of profits less losses of
- - - - -
joint ventures 39 39 6
Profit before taxation 1,940 1,274 247 3,045 281 (683) 6,104 6,050
1. % Share of Group EBITDA (including Corporate Items).
42Operating Expenses and Depreciation – Investment in Talent, Infrastructure
and Strategic Initiatives
Staff costs and IT & computer Premises Professional Other operating Depreciation and
Total opex
related expenses maintenance exp expenses fees expenses (1) amortisation
(HK$ mn)
+ 5% + 13% - 8% + 78% - 3% + 6% + 10%
2,076
1,953
1,328 1,398
495 545
278 315 246 238
64 59 37 66
1H 2019 1H 2020 1H 2019 1H 2020 1H 2019 1H 2020 1H 2019 1H 2020 1H 2019 1H 2020 1H 2019 1H 2020 1H 2019 1H 2020
Staff costs due to due to maintenance No significant change Professional fees No significant change Total opex due to due to new and
annual payroll expenses for new IT incurred for strategic staff costs, IT costs and renewed office leases,
adjustments and systems and network initiatives and consulting professional fees and roll-out of new IT
headcount arising upgrades, and costs fee for HKATS review systems
from acquisition of from BayConnect
BayConnect in June
2019
1. Includes product marketing and promotion expenses
431H 2020 Performance above Historical Trendline
Quarterly performance
(HK$ million)
Profit attributable to shareholders
Revenue and other income 4,773
Operating expenses (1)
EBITDA 4,288 4,290
4,150 4,102
4,057 4,044 4,009
3,987
3,746
3,747 3,571
3,523
3,454 3,722
3,318 3,307
3,195 3,155
3,215
2,879 3,061 3,077 3,038
2,775 3,048 2,984
2,796 2,866
2,848 2,600
2,751
2,638 2,555 2,404
2,567 2,971
2,277
2,078 2,562 2,608 2,597
2,520 2,215 2,479 2,443
1,946 1,897 2,045 2,014
2,330 2,262
1,705 2,207
2,033 1,979
1,878 1,828
1,716 1,777
1,575 1,531 1,553 1,543
1,432
1,241
1,025 1,167 1,146 1,025 1,051
933 968 935 983 970 983 949
862 881 829 854 834 834 833 878 887
718
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2015 2016 2017 2018 2019 2020
1H 2020 performance reflects resiliency of core business
despite macroeconomic and COVID-19 induced uncertainty.
1. Excludes depreciation and amortisation, finance costs, share of profits/(losses) of joint ventures, and non-recurring costs arising from the proposed combination with London Stock Exchange Group (LSEG)
2. Dotted trend lines are illustrative and do not constitute a forward forecast. 44You can also read
