Higher income from trading fees gave Hong Kong Exchanges & Clearing Ltd. a 79% boost in the first quarter from a year earlier, Thomson Financial reports.

Net profit rose to HK$1.65 billion from HK$923 million, it said.

“The rise in profit in the first quarter of 2008 was primarily attributable to higher turnover-related income, resulting from the increase in activities in the cash and derivatives markets, and growth in net investment income,” the company said in a statement.

In 2007, HKEx's net profit more than doubled to HK$6.2 billion as brisk trading during the second half of the year bolstered overall income. But earnings from stock trading fees and investments dropped in the first quarter of 2008 as market activity slowed from the fourth quarter of last year.

Daily turnover in the cash market averaged HK$98.7 billion in the first quarter, against HK$134.5 billion in the preceding quarter.

The decline reflected “weakened investor confidence,” the

The Hong Kong benchmark index has fallen 27% since reaching a peak of nearly 32,000 points on October 30.

But HKEx's net profit for the quarter topped the estimates of some analysts.

JP Morgan had expected HKEx's net profit to rise 64% to HK$1.5 billion as turnover recovered in the latter part of the quarter.

The HKEx said income related to market turnover stood at HK$1.4 billion, up 70% from HK$827 million.

Despite a slowdown in new initial public offerings, HKEx's fees from new listings were supported by a 73% surge in the number of newly-listed warrants to 1,924 from a year earlier, Michael Chan, analyst with JP Morgan, said in a recent note.

JP Morgan has an “overweight” call on HKEx and a price target of HK$200 for the stock.

Going forward, HKEx is betting that investments

“HKEx is focusing on facilitating the use of our platform for investment of mainland funds through the Qualified Domestic Institutional Investor (QDII) scheme, and attracting overseas issuers to list in Hong Kong,” said the exchange. The QDII is a scheme that allows qualified mainland institutions to invest overseas.

The market operator also plans to allow more foreign companies to list in the city by way of depositary receipts in the third quarter.

Shares in HKEX were last down 1.6% at HK$151.30. The stock has fallen 32% so far this year, while the market's benchmark Hang Seng index has declined by only 8%.