Hong Kong Exchanges and Clearing Limited

Good afternoon, ladies and gentlemen. Welcome to HKEX 2020 Annual Results Analyst Presentation. Today, we are very pleased to have our Interim Chief Executive, Kelvin Tsai, our Co-President, Romy Lambert, and our Group CFO, Vanessa Lau. We will talk about our key highlights of 2020, our financial performance, as well as strategic and business updates. We will then open the floor to take your questions, either via webcast or audio. With no further ado, over to you, Kelvin.

Thank you, Ricky. Well, thank you all. Good afternoon, good evening, good day. I think today must be a very busy day for all of us. Well, I'm very pleased and proud here today announcing the results for HKEX year 2020. It's a set of very strong results we would like to share with you. This is a very difficult year, unusual and also extreme volatility, especially during March 2020. I think all our stakeholders, our market participants and my colleagues actually have done a very good job. We survived all the turmoil and volatility and all the challenges unprecedented and we managed to get a set of very good results. We are very pleased and proud. In terms of financial performance, if you look at slide 4, there's a set of records that I don't want to run through them one by one, but I just want to highlight a few. Record year for three consecutive years. I think this is something we hope we can, well, we believe we will continue to work very hard and keep the record. Revenue & Income $19.19B, Core Business up by 24% Trading & Clearing Fees, Cash Market driven by Record Average Daily Turnover AutoConnect program both at StockConnect and BondConnect performed well. StockConnect contributed roughly 10% of the overall revenue which has been growing very fast and very promising. Net investment income down 18% given the investment backdrop and also We're comparing to a record year in 2019 in terms of net investment income. So I think Vanessa would give more highlights, explanation on elaboration on this front. Profit attributable to our shareholders is record high, 11.5 billion, 23% up year on year. In terms of business from various perspectives, you look at it, very strong IPO market, number two globally, and number two in terms of fund raise, HK$400 billion or USD50 billion, and I think it's the highest in the last decade, so very, very strong promising. And the other thing is about the Connect Scheme that I also highlighted just now is for the ATT, actually it's record, both southbound, northbound. I think that's very promising in both directions, not just single direction. In terms of derivatives and also structure product, we have a lot of new products. 38 MSCI contracts, futures and options, futures first, and then subsequently followed by options coming up very quickly this year. And while that is a continuation of making ourselves the risk management centre for the region, For LME, it's a pretty challenging year, especially for the metal market near the real economy, which actually has a lot of challenges comparing to the financial market. Well, proven to be very resilient and very adaptable to the difficult and changing environment. Very successful year in managing the situation, migrating from the rain to electronic pricing, preserving the function of price discovery for the global metal market. Very well done job for the team. Sustainable and Green Exchange and also HKEX form a foundation for our charity purposes. So more information on the financial aspect will be provided by Vanessa. Pass on to you.

Thank you, Kelvin. Good afternoon, everyone. Thank you for joining us. I'm Vanessa Lau. I would now like to share with you our HKEX full year 2020 financial results. HKEX had a strong year in 2020, and we are very pleased to report record financial results for the third consecutive year. Total revenue and other income was up 18% year-on-year to $19.2 billion. Our core business revenue was up 24% year-on-year, driven by record headline ADT of $129.5 billion. Net investment income fell by 18% versus the record investment income in 2019, reflecting the performance of the global equity and bond markets and a low interest rate environment. EBITDA margin was strong at 77%. Profit attributable to shareholders, EPS and dividend per share all reached record highs. with profit after tax at $11.5 billion up 23% and EPS and dividend per share up 22% from 2019. Turning to the next page on our detailed financials. Our core business showed strong growth versus 2019 for both revenue and profit. You will see that effective July 2020 Donation income from the Stock Code Balloting Charity Scheme was received by the HK EX Foundation and the amounts previously paid by the issuers directly to the Hong Kong Community Chest were paid by the HK EX Foundation. As a result, donation income of $106 million and charitable donations of $112 million were recorded under income and OPEX respectively. Excluding foundation charitable donations, OPEX was up 8%, mainly driven by higher staff costs, IT costs, and professional fees. EBITDA margin reached 77%, up 2% from 2019. I would point out that transaction-related expenses, which were previously included in OPEX, are now presented under a separate line below revenue and other income to better reflect the nature of such direct costs. Moving on to the next page, where we look at Q4 results versus Q3. Headline ADT was the same across the two quarters, but Q4 profit after tax was 13% lower than Q3 due to fewer trading days, lower northbound ADT, and higher OPEX, including our year-end compensation. This is seasonally consistent with the previous years. Moving on to look at the trend line. We have been generally trending up over the last five years on both revenue and profit. Q2 to Q4 this year has been significantly above this historical trend line. This reflects the resiliency of our core business, the foundations laid in the diversification of our business throughout the past few years, and the continued growth in our Stock Connect program. Our cost discipline has also been strong and has helped us maintain an attractive EBITDA margin. Next, we take a look at the year-on-year performance of our operating segments. You can see that all our business segments achieved higher revenue year-on-year, largely driven by the higher ADT. I would highlight two particular drivers, which continued to show significant growth. Firstly, Stock Connect volume continued to achieve new records, with northbound and southbound ADT more than doubling that of 2019. As a result, Stock Connect revenue reached a new record high at $1.9 billion, contributing to 10% of our group's total revenue and other income in 2020. Secondly, listing fees were up 16%, with 154 new company listings in 2020. And additionally, the number of newly listed DWs and CBBCs reached record highs. Corporate items were down because of lower net investment income, partly offset by the HKEX Foundation donation income. Net investment income, as you can see, was $2.2 billion versus $2.7 billion in 2019. Net investment income comprises of internally managed corporate funds, margin and clearing house funds, and a non-core, actively managed external portfolio. The internally managed funds were down by approximately $200 million year on year due to lower interest rates, but partly offset by higher fund sizes. The external portfolio made a gain of $487 million after a year of heightened volatility. However, when compared with a record gain of $789 million in 2019, the portfolio was down $300 million year on year, partly attributable to lower fund size. That said, the portfolio has generated an overall gain of $1.8 billion since its inception in December 2016, representing a 6.7% annualized return. Lastly, let's take a look at our operating expenses. Excluding foundation charitable donations, which I have already mentioned, OPEX was up 8%, reflecting our investments in talent, technology upgrades, and strategic projects, including our acquisition of BayConnect in June 2019. So reflecting on the full year of 2020, we are very pleased with overall performance. Our core business continues to show resilience against the volatile and uncertain macro and geopolitical backdrop, and we have made considerable progress on our strategic objectives. We believe StockConnect will continue to be a key revenue driver, as will the strong IPO pipeline, with more new economy companies and homecoming secondary listings. We are well placed to capture future growth opportunities, and we will of course continue to focus on managing our costs and risks. It has been a challenging year for HKEX staff, but also for many in our community, and we are very grateful for the continued support of all our stakeholders. With that, I will hand back to Kelvin for our business and strategic update.