* 2016 volumes struggle to match record-breaking 2015 levels
* Metals contracts also down due to weak global demand
* HKEX cautions on challenging outlook amid political
(Adds details of results, comment on outlook)
HONG KONG, Feb 27 Hong Kong's stock exchange
operator said on Monday its 2016 net profit fell 27 percent due
to a decline in fees generated by stocks and metals trading on
the bourse as it struggled to match stellar volumes seen during
2015's record rally.
Hong Kong Exchanges and Clearing Ltd (HKEX)
reported a net profit of HK$5.8 billion ($747.36 million) for
2016, slightly below analysts' average estimate of HK$6 billion,
according to Thomson Reuters data.
"The global financial markets were volatile and overshadowed
by political and economic uncertainties. At home, there were
concerns that mainland China’s economy was slowing down and that
interest rates would rise. All these contributed to cautious
sentiment among investors and created a challenging market
environment for the Group," HKEX said in a statement.
Average daily trading on the bourse in 2016 fell 37 percent
to HK$70 billion compared with the previous year. Group profits
were also dented by the bourse's London Metal Exchange
subsidiary, which saw trading volumes fall 8 percent year-on-
year due to subdued metals demand causing commodities-related
revenues to decline 10 percent to HK$1.6 billion.
Stocks trading volumes struggled last year to match the
records seen in 2015, when a dramatic rally on the mainland
drove frantic activity on the Hong Kong bourse.
The exchange cautioned that the operating environment for
financial markets is expected to remain challenging and volatile
this year due to "many political and economic uncertainties".
HKEX chief executive Charles Li has banked on deepening the
bourse's ties with mainland China to sustain profit growth,
despite fears over the Chinese economy which is saddled with
rising bad debt. The bourse said on Monday it would continue to
broaden its connectivity schemes with the mainland.
The exchange's shares have risen around 8 percent this year,
compared to a 9 percent year-to-date rally in the main Hang Seng
($1 = 7.7607 Hong Kong dollars)
(Reporting by Michelle Price; Editing by Muralikumar