HONG KONG’S stock exchange operator is betting that rising volumes from the trading link with the mainland and the addition of new products such as equity derivatives and commodities to it will boost revenues despite the program’s subdued start.

    Hong Kong Exchanges and Clearing Ltd. (HKEx) has banked on the stock connect program, which allows investors on the mainland to buy Hong Kong shares and vice versa, to boost trading volumes in Hong Kong.

    But the bourse said last week that the trading link with Shanghai that launched Nov. 17 contributed just HK$68 million (US$8.8 million) to revenue in 2014, underscoring how disappointing trading on the program has capped profit growth.

    Daily trading volumes via the program have been lackluster mainly due to regulatory and technical hurdles that make the program unappealing to many institutional investors.

    As investors become more familiar with the program and the hurdles are overcome, trading volumes will pick up steadily in the quarters ahead, analysts said. The trading link has started 2015 better.

    HKEx CEO Charles Li said that the program will get a further boost when equity derivatives and commodities are added to the program in the second half of 2015. Trading of international equities, fixed income and currency products would be added later, he said.

    The new products should help smoothen revenue flow for HKEx, which has for years depended on large stock offerings from mainland companies for growth.

    “We are faced with huge challenges. In the last 20 years, we didn’t have to do too much,” said Li, referring to the steady flow of mainland IPOs until 2010.

    HKEx saw 122 initial public offerings in 2014, compared with 110 in the previous year. The IPOs raised 38 percent more in 2014 at HK$232 billion, ranking second in the world by funds raised last year, the bourse said.

    Total funds raised including secondary offerings hit HK$942 billion, a record for the Hong Kong exchange.

    “We believe Hong Kong Exchanges and Clearing is overvalued. Shanghai-Hong Kong stock connect is off to a slow start and contribution to earnings is low,” analysts from Morningstar wrote in a note. (SD-Agencies)