ISAAC LAWRENCE

The Securities and Futures Commission (SFC) on October 6 published its Financial Review of the Securities Industry, showing that all securities dealers and securities margin financiers recorded combined net profit of HK$51.7 billion in the six months ended June 30, 2026. That was a 21% increase from HK$42.8 billion in the second half of 2025. The net profit figures in the report are before tax.

The Hang Seng Index fell during the same period, closing at 22,881 points at the end of June, down 11% from the end of 2025. Market trading, however, became more active. The Hong Kong Exchanges and Clearing’s average daily turnover rose 9.3% from the second half of 2025 to a record HK$283 billion in the first half. The total value of transactions by brokerage clients, including local and overseas trades in stocks, bonds and other securities, increased 24% from HK$119.7 trillion to HK$149 trillion. Citing Bamboo Works, the report said the figure was about 50% higher than the approximately HK$99.2 trillion recorded a year earlier. Net profit in the first half of last year was HK$28.9 billion, implying a year-on-year increase of about 79% this year.

There were about 5.7 million active clients at the end of June, up 10% from the end of 2025. Of these, about 3.71 million were margin clients and about 1.97 million were cash clients. The five largest securities dealers accounted for about half of all active securities clients in Hong Kong.

Commission income rises as expenses fall

Total industry revenue rose 4% to HK$155.9 billion. Trading commissions and interest income increased 13% to HK$45.4 billion, with net securities trading commission income up 21% to HK$20.2 billion — broadly in line with the increase in transaction value. Other income rose 14% to HK$70.7 billion, including a 54% increase in net proprietary trading profit to HK$6.3 billion. Income from advisory and underwriting services fell 6% to HK$15.4 billion.

Total expenses and interest expenses fell 2% to HK$104.2 billion. The combination of higher revenue and lower costs meant net profit growth of 21% was significantly faster than revenue growth of 4%.

Mid-sized brokerages post strongest growth as larger firms see profits fall

The aggregate net profit of exchange participants was HK$23.7 billion, up 20% from the second half of 2025. The report divided participants into three groups according to transaction value:

  • Group B, ranked 15th to 65th by transaction value, recorded a 37% increase in net profit to HK$12.8 billion, the strongest growth among the three groups.
  • Group C, ranked 66th and below, saw net profit rise 24% to HK$4.5 billion.
  • Group A, comprising the 14 participants with the highest transaction values, recorded a 5% decline in net profit to HK$6.5 billion.

Based on Table 2 of the report, Group B’s net securities commission income rose about 28%, while net proprietary trading profit increased about 69%. Group A’s total revenue grew about 5%, but salaries and other expenses combined with interest expenses rose about 11%. Group C’s transaction value fell about 18%, with its profit growth driven mainly by lower expenses.

Asset management revenue falls despite growth in assets under management

Fees from asset management-related activities fell 21% from the second half of 2025 to HK$24.4 billion. The SFC said the decline was mainly due to the timing of fee recognition. In particular, performance fees were booked in December 2025, but none were recorded in the first half of 2026. The report also showed that assets under management stood at HK$16.5 trillion at the end of June, up HK$1.6 trillion from HK$14.9 trillion at the end of 2025.

Margin loans also increase

Total outstanding margin loans stood at HK$276.3 billion at the end of June, up 28% from the end of 2025. The increase was slightly faster than the growth in transaction value. The average securities financing collateral ratio was 4.7 times, compared with 4.5 times at the end of 2025. The 20 largest margin finance providers accounted for 87% of total margin loans in the industry.

Richard Yip Chi-hang, the SFC’s executive director of the intermediaries division, said the growth in profits was mainly driven by increased trading activity and greater investor participation.