Where do I start when it comes to Hong Kong Exchange?!

But really, where do I start???

I’ve spent about 10 hours so far this week simply trying to understand the annual reports and the statements that are included, whilst not having the greatest understanding of the actual company. 

So I have decided that I am going to stop where I am with my assignment and start with the basics -

What is HKEx?

Hong Kong Exchanges is a company that operates a securities and derivatives market and the clearinghouses for them both. They are based in Hong Kong and began trading in 2000, this year marking its 15th Anniversary. The celebration of this anniversary seemed to be a huge affair from what they have posted on their website which shows great improvement within the company and so many tremendous accomplishments, foremost, they are now one of the world’s largest exchange owners based on the market capitalization of their shares. In their 15th Anniversary announcements they showed that their closing price of dividends to share holders had escalated dramatically from $8.25 in 2000 sky high to $309.40 in 2015. 

It also shows that they have diversified their company over the 15 years, primarily through their take over of the London Metal Exchange (LME) in 2012 which already accounts for 16% of their Revenue, which in a multibillion dollar company is quite a lot.

Their website seems very forthcoming with all information displayed clearly which was surprising to me considering they are a Chinese company. However, considering they are a multi billion-dollar company, I shouldn't have really been that surprised. 

I’ve started to read through their annual report for 2014 and you can see how well they are operating their business; almost all of the key aspects of the company have shown very similar growth. This is both for income and expenses and such. It’s my view that these both go hand in hand and so their report looks positive in my eyes so far.

The overall growth in revenue and income is attributed to higher trading volumes and growth in their other categories. Whilst the growth in operating expenses was in direct relation to the former with the higher trading volumes requiring a higher head count, along with increased legal fees.

If I were investing in their company, my main focus would be on what I can get from the company overall and with a 12% increase in basic earnings per share and a whopping 25% increase in dividends per share, I would be more than happy to see these results.

One of their biggest strategic achievements for the year was the launch of their Shanghai-Hong Kong Stock Connect program, which involves investors in both Mainland China and Hong Kong to be able to access each other’s equity markets. This scheme will also hopefully help the never-ending process of making the Remnibi (Chinese currency) internationalized and allow the company to continue expanding.

The biggest question I have continuously popping up in my head is “What does the internationalization of a currency really mean?” Although this question doesn’t really have much impact on the financial statements, I feel as though it will greatly help my understanding of the company if I can figure it out. So this is my mission over the next couple of weeks, hopefully with some help by my fellow accounting students.

Overall, I find the company to be very confusing because of the technical language they use because I’m unfamiliar with it, but the numbers don’t lie and the company appears to be flourishing.

I feel as though the picture below really is the perfect example of how this company is trending in what I’ve seen and read so far.