Core Viewpoint - Huayuan Securities initiates coverage on Hong Kong Exchanges and Clearing Limited (HKEX) with a "Buy" rating, highlighting its unique ecological position connecting "capital" and "goods," along with regional monopoly, scarcity, and commercial viability [1] Group 1: Financial Performance - From 2015 to 2024, HKEX's revenue and other income are expected to grow at a compound annual growth rate (CAGR) of 6.3%, while net profit attributable to shareholders is projected to grow at a CAGR of 5.8% [1] - In Q3 2025, the average daily turnover (ADT) of stock securities products increased by 150% year-on-year to HKD 267.9 billion, with southbound and northbound trading volumes growing by 285% and 144% respectively [1] - For the first three quarters of 2025, revenue from spot trading increased by 75% year-on-year to HKD 11.1 billion, accounting for 51% of total revenue [1] Group 2: Derivatives and Commodity Performance - In Q3 2025, the average daily trading volume of derivative contracts decreased by 7% year-on-year to 727,000 contracts, while stock options saw a 30% increase in daily trading volume [2] - The commodity segment's revenue and other income grew by 9.5% year-on-year, with the average daily trading volume of LME metal contracts increasing by 3% [3] Group 3: Investment and Strategic Initiatives - Investment income for Q3 2025 decreased by 16% year-on-year to HKD 1.02 billion, primarily due to reduced investable funds from property redemptions [4] - HKEX is advancing strategic measures, including the launch of LME-approved warehousing facilities, adjustments to minimum price fluctuations, and the introduction of new products like the Hang Seng Biotechnology Index futures [5] Group 4: IPO Contributions and Market Dynamics - In the first three quarters of 2025, 69 IPOs raised a total of HKD 188.3 billion, marking a new high since 2022, with a significant increase in the number of IPO applications [6] - The top ten stocks by trading volume in Q3 2025 included seven internet and technology companies, contributing 30% to the total market ADT [7]

Financial Data and Key Metrics Changes - HKEX reported record revenue and profit for 2025, with revenue and other income reaching HKD 29.2 billion, a 30% increase from 2024, and profit after tax at HKD 17.8 billion, up 36% year-on-year [6][7] - Earnings per share (EPS) increased to HKD 14.05, reflecting a 36% growth compared to the previous year [6] - The board declared a total dividend of HKD 12.52 per share for 2025, a 35% increase from 2024 [7] - Average daily trading (ADT) reached HKD 249.8 billion, a 90% increase year-on-year, with both Northbound and Southbound Stock Connect achieving all-time highs [7][9] Business Line Data and Key Metrics Changes - Trading volumes in the cash and derivatives markets reached record highs, with derivatives market volumes increasing by 7% and commodities market volumes by 8% compared to 2024 [7][9] - The introduction of new IPO price discovery rules and support for specialist technology issuers contributed to increased market activity [3][4] Market Data and Key Metrics Changes - The secondary market remained vibrant, driven by renewed global interest in Hong Kong equities and rising demand for short-dated options [15] - The average daily trading volume of exchange-traded products nearly doubled from the previous year [15] Company Strategy and Development Direction - HKEX aims to enhance its multi-asset ecosystem, focusing on equities while expanding into fixed income, currency, and commodities [27][18] - The company plans to strengthen connectivity with other Asian markets and enhance its product offerings to meet the growing demand for China assets [19][18] - Strategic investments, such as the acquisition of a 20% stake in CMU OmniClear, are intended to bolster Hong Kong's position as a global hub for bond fundraising and risk management [4][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining strong momentum in 2026, supported by a robust IPO pipeline and ongoing market reforms [14][27] - The macroeconomic landscape presents both challenges and opportunities, with a focus on capital diversification and the evolving needs of global investors [16][26] Other Important Information - HKEX's effective tax rate increased to 15.7% in 2025 due to new tax provisions [8] - The company has made significant investments in technology and market reforms to enhance liquidity and attract high-quality issuers [24][25] Q&A Session Summary Question: Potential expansion of connectivity with other regions - Management highlighted the strong demand for connectivity with other Asian markets and ongoing initiatives for dual listings and cross-listing opportunities [32][34] Question: Cost discipline amid increasing initiatives - Management emphasized the importance of maintaining cost discipline while making thoughtful investments in future growth areas [35][36] Question: Revenue contribution from CMU OmniClear - Management indicated that the investment in CMU OmniClear is a strategic step towards building a comprehensive fixed income ecosystem, with potential for long-term returns [42][44] Question: IPO pipeline conversion probability - Management expressed optimism about the healthy IPO pipeline, noting strong demand and positive aftermarket performance for completed IPOs [55][56] Question: Timeline for Southbound RMB counter - Management confirmed ongoing progress on the Southbound RMB counter, with plans to accelerate implementation [57] Question: Cost growth expectations - Management projected a moderate growth in operating expenses, emphasizing stringent cost control measures while investing in future initiatives [66][68] Question: Importance of T-bond futures - Management acknowledged strong market demand for T-bond futures and confirmed ongoing discussions with partners to advance this initiative [62][64]

Financial Data and Key Metrics Changes - HKEX reported record revenue and profit for 2025, with revenue and other income reaching HKD 29.2 billion, a 30% increase from 2024, and profit after tax at HKD 17.8 billion, up 36% year-on-year [6][8] - Earnings per share (EPS) increased to HKD 14.05, reflecting a 36% growth compared to the previous year [6] - The board declared a second interim dividend of HKD 6.52 per share, totaling HKD 12.52 for the year, a 35% increase from 2024 [7] Business Line Data and Key Metrics Changes - Trading volumes in Hong Kong cash and derivatives markets reached record highs, with average daily turnover (ADT) of HKD 249.8 billion, a 90% increase year-on-year [8] - The derivatives market saw a 7% increase in trading volumes, while the commodities market increased by 8% compared to 2024 [8] - The group's effective tax rate rose to 15.7% in 2025 from 11.4% in 2024 due to new tax provisions [9] Market Data and Key Metrics Changes - Northbound and Southbound Stock Connect recorded all-time highs, indicating strong cross-border trading activity [8] - The secondary market remained vibrant, driven by renewed global interest in Hong Kong equities and rising demand for short-dated options [15] Company Strategy and Development Direction - HKEX aims to enhance its multi-asset ecosystem, focusing on equities while developing fixed income, currency, and commodities markets [25] - The company is expanding its connectivity with markets in the Middle East and Southeast Asia, enhancing its regional liquidity pool [20] - Strategic initiatives include the introduction of new IPO price discovery rules and the launch of the HKEX Tech 100 Index, focusing on Hong Kong's technology sector [3][4] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining strong momentum in 2026, supported by a robust IPO pipeline and ongoing market reforms [14][25] - The macro landscape shows persistent uncertainty, but there are significant opportunities for capital diversification into Asia [16][17] - The company is well-positioned to capture emerging trends in technology and innovation sectors, particularly from mainland China [17][18] Other Important Information - HKEX's investment in CMU OmniClear is part of its strategy to strengthen Hong Kong's position as a global hub for bond fundraising and risk management [4][21] - The company is committed to future-proofing its technology and operations to meet growing demand for China assets [24] Q&A Session Summary Question: Potential expansion of connectivities with other regions - Management highlighted the strong demand for connectivity with other Asian markets and ongoing initiatives for dual listings and cross-listing opportunities [30][31] Question: Cost growth in line with revenue - Management emphasized the importance of maintaining cost discipline while making thoughtful investments in technology and personnel to support future growth [32] Question: Revenue contribution from CMU OmniClear - Management indicated that while the initial revenue contribution from CMU would be modest, it is a strategic investment aimed at building a comprehensive fixed income ecosystem [42][46] Question: IPO pipeline conversion probability - Management expressed optimism about the healthy IPO pipeline, noting strong demand and positive aftermarket performance for recent IPOs [53] Question: Timeline for Southbound RMB counter - Management confirmed that the implementation of the Southbound RMB counter is progressing, with updates to be shared as they become available [54] Question: Multi-asset business monetization opportunities - Management acknowledged the significant potential in the fixed income market and the need for a holistic approach to developing a multi-asset ecosystem [78][79]

2025 Annual Results Analyst Presentation Bonnie Y Chan Chief Executive Officer, HKEX Group Herbert Hui Group Chief Financial Officer, HKEX Group 26 February 2026 Disclaimer The information contained in this document is for general informational purposes only and does not constitute an offer, solicitation, inducement, invitation or recommendation to subscribe for, buy or sell any securities or other products or to provide any investment advice or service of any kind. This document is solely intended for dist ...

Group 1 - The U.S. stock market saw all three major indices rise, with the Nasdaq up 1.26%, S&P 500 up 0.81%, and Dow Jones up 0.63%, driven by gains in large tech stocks like Netflix, Microsoft, and Meta [4] - International oil prices experienced slight fluctuations, with WTI crude oil down 0.29% at $65.44 per barrel, while Brent crude oil rose 0.27% to $70.77 per barrel [5] - International gold prices increased, with spot gold up 0.73% at $5,170.21 per ounce, and COMEX gold futures up 0.02% at $5,177.30 per ounce [5] Group 2 - Huawei is set to hold an innovative product launch event in Madrid, Spain, on February 26, themed "Now is Your Run" [3] - The Chinese government is pushing for a more efficient use of water resources, aiming for advanced levels of water resource conservation and utilization by 2035 [7] - The Shanghai government announced a reduction in housing purchase restrictions to better meet residents' housing needs and promote a stable real estate market [8] Group 3 - Meizu's mobile phone business has effectively ceased operations and is set to officially delist in March 2026, while its FlymeAuto business will operate independently [13] - Hong Kong Stock Exchange is considering expanding the scope of IPO confidentiality applications to enhance market competitiveness [14] - JD.com's founder Liu Qiangdong is entering the yacht industry, having received orders for five large catamarans, each priced at an average of €60 million [15] Group 4 - Nvidia reported fourth-quarter revenue of $68.1 billion, a 73% year-over-year increase, exceeding market expectations [23] - Huace Film and Television denied rumors of dissolving its film department, stating that operations are normal despite previous losses [24]

Investment Rating - The report assigns a "Buy" rating for Hong Kong Exchanges and Clearing Limited (00388.HK) as a first coverage [4]. Core Insights - The report highlights that Hong Kong Exchanges and Clearing Limited experienced a significant increase in revenue and net profit for the first three quarters of 2025, with revenue and net profit growing by 37% and 45% year-on-year, reaching HKD 21.9 billion and HKD 13.4 billion respectively [4]. - The EBITDA margin improved by 5 percentage points to 79% due to scale effects, with Q3 alone showing an 8% and 10% quarter-on-quarter growth in revenue and net profit [4]. - The report emphasizes the strong performance in spot trading and stock options, with average daily trading amounts (ADT) for stock securities products increasing by 150% year-on-year to HKD 267.9 billion in Q3 [5]. Summary by Sections Financial Performance - For the first three quarters of 2025, the revenue from spot trading increased by 75% year-on-year to HKD 111 billion, accounting for 51% of total revenue [5]. - The average daily trading amount for southbound and northbound trading increased by 285% and 144% respectively, contributing to the overall growth in trading volume [5]. - The financial derivatives segment saw a decline in average daily contract volume by 7% year-on-year, while stock options trading increased by 30% [5]. Strategic Initiatives - Hong Kong Exchanges and Clearing Limited has implemented several strategic measures, including the launch of LME-approved warehousing facilities and adjustments to minimum price fluctuations in the securities market [6][7]. - The company is also focusing on enhancing market vitality and technological empowerment, with plans to shorten the settlement cycle for the cash market [6][7]. IPO Contributions - In the first three quarters of 2025, there were 69 successful IPOs on the Hong Kong Exchange, raising a total of HKD 188.3 billion, marking the highest level since 2022 [8]. - The report notes that internet and technology stocks were the main contributors to trading volume, with the top ten stocks accounting for 30% of the total market ADT [8]. Profit Forecast and Valuation - The report projects that the net profit for Hong Kong Exchanges and Clearing Limited will reach HKD 17.9 billion, HKD 20.3 billion, and HKD 22.1 billion for 2025, 2026, and 2027 respectively, with year-on-year growth rates of 37.5%, 13.1%, and 9.0% [9]. - The current price-to-earnings (P/E) ratios are forecasted to be 29.1, 25.7, and 23.6 for the years 2025, 2026, and 2027 [9].

Core Viewpoint - The Hong Kong government has shifted its fiscal budget for 2026-2027 towards prudent financial management and precise policy implementation, aiming to transition from a projected deficit of approximately HKD 67 billion to a surplus of HKD 2.9 billion by 2025/26 [1] Economic Outlook - The Hong Kong economy is expected to achieve a real growth rate of 2.5% to 3.5% in 2026, with an average annual growth rate of 2.9% from 2026 to 2029 [1] Fiscal Measures - The budget emphasizes both expenditure control and revenue enhancement, with plans to reduce government spending by 2% annually over the next two years, saving approximately HKD 78 billion and HKD 156 billion respectively [10] - The government plans to increase the stamp duty rate on residential property transactions valued over HKD 100 million from 4.25% to 6.5%, which is expected to generate an additional HKD 1 billion annually [10] Financial Sector Reforms - The budget includes measures to deepen financial market reforms, enhance market liquidity, and attract high-quality issuers to issue RMB bonds in Hong Kong [3][4] - The Hong Kong Stock Exchange (HKEX) will implement a revised framework for structured product listings and consult on a T+1 settlement cycle [3] Innovation and Technology - The budget focuses on driving economic transformation through innovation and technology, with a commitment to accelerate the industrialization of AI and promote its integration across various sectors [7] - A HKD 10 billion "Innovation and Technology Industry Guiding Fund" will be launched to attract private investment in startups within AI, life sciences, and renewable energy [7] Digital Assets and Financial Technology - The budget outlines plans to establish a comprehensive regulatory framework for digital assets, including the issuance of tokenized bonds and the development of a digital asset platform by the Hong Kong Monetary Authority [13][14] - The government will also introduce a licensing system for stablecoin issuers, marking a significant step towards integrating digital assets into the financial system [13][14] International Financial Center Development - The budget aims to solidify Hong Kong's position as an international financial center by exploring tax incentives for gold trading and settlement, and enhancing collaboration with the Shanghai Gold Exchange [15]

Core Viewpoint - The Hong Kong government's recently announced budget for the fiscal year 2026/27 aims to reinforce Hong Kong's status as an international financial center, activate market vitality, and expand the financial sector, providing multiple policy benefits for the Hong Kong Stock Exchange (HKEX) [2] Policy Benefits and Market Reforms - The budget introduces several favorable policies for HKEX, including revisions to the listing requirements for "dual-class shares," facilitating secondary listings for overseas issuers, and optimizing the IPO process, which will allow a wider range of companies to access the Hong Kong capital market [3] - HKEX plans to enhance the listing framework for structured products and consult on the implementation of a "T+1" settlement cycle, which will significantly improve market efficiency and align with international standards [3] - The successful implementation of the "no market closure during bad weather" policy has ensured market liquidity and generated approximately 2.5 billion HKD in stamp duty revenue for the government [3] Deepening Connectivity and Expanding RMB Product Ecosystem - The budget emphasizes enhancing connectivity with the mainland, including the introduction of government bond futures and the inclusion of real estate investment trusts in cross-border trading [4] - Measures to promote RMB internationalization include increasing the total quota for RMB business funding to 200 billion RMB and regularly issuing RMB bonds to enrich the offshore RMB market [4] New Industry Listing Channels - The budget highlights the development of emerging industries such as aerospace, prompting HKEX to review listing regulations to attract more aerospace companies to list in Hong Kong [5] - The establishment of a 10 billion HKD "Innovation and Technology Industry Guidance Fund" aims to direct market capital into strategic emerging sectors like life sciences and artificial intelligence [6] Digital Asset Trading and Commodity Business Expansion - The budget supports the establishment of a licensing system for digital asset trading and custody, positioning HKEX to capture opportunities in the global digital asset market [7] - Plans to create an international gold trading market will enhance HKEX's commodity business, with a target of exceeding 2,000 tons in gold storage within three years [8] Growth in Family Offices and Asset Management - The number of family offices in Hong Kong has surpassed 3,300, prompting the government to optimize tax regulations to attract more family offices and funds [9] - The upgrade of HKEX's comprehensive fund platform is expected to enhance revenue through improved market efficiency and lower transaction costs [10] Global Network Expansion and Asset Management Business Development - HKEX is collaborating with the Hong Kong Monetary Authority to establish a multi-asset trading infrastructure that enhances cross-border collateral connectivity [11] - The government plans to submit a bill to facilitate the privatization of real estate investment trusts, further expanding HKEX's asset management business [12]

Core Viewpoint - The Hong Kong government has introduced the 2026-2027 Fiscal Budget, focusing on enhancing the financial market's competitiveness and resilience through various reforms and initiatives aimed at promoting the use of the Renminbi and improving market infrastructure [1][2]. Group 1: Financial Market Reforms - The budget emphasizes reducing Renminbi foreign exchange transaction costs and encouraging the issuance of Renminbi bonds in Hong Kong [1]. - Plans to accelerate the implementation of government bond futures and include Real Estate Investment Trusts (REITs) in the "mutual market access" framework are highlighted [1]. - Continuous reforms in the securities market are proposed, including revising "dual-class share" requirements and facilitating secondary listings for overseas issuers [1]. Group 2: Asset and Wealth Management - The budget outlines legislative measures to optimize the tax regime for family offices and funds, facilitating the privatization of REITs [1]. - A proposal to exempt stamp duty for the transfer of non-residential properties for REITs preparing for listing is included [1]. Group 3: Market Infrastructure and Connectivity - The establishment of a one-stop multi-asset trading post-securities infrastructure covering both mainland and Hong Kong stocks and bonds is under consideration [1]. - The budget aims to enhance market resilience and efficiency through deepening market connectivity and creating a diverse asset ecosystem [2]. Group 4: Industry Reactions - The Hong Kong Stock Exchange welcomes the budget measures, stating they will strengthen Hong Kong's position as a leading international financial center [2]. - The CEO of the Hong Kong Stock Exchange emphasizes the commitment to product innovation and collaboration with regulatory bodies to enhance market attractiveness [2].

Group 1 - The Hong Kong government released the 2026-2027 fiscal budget, which includes measures to optimize the securities market and attract issuers [1] - The Hong Kong Stock Exchange (HKEX) plans to revise the listing requirements for "dual-class shares," facilitate secondary listings for overseas issuers, and provide more flexibility for biotech and specialized technology companies in the IPO process [1] - HKEX aims to implement a structured product listing framework and consult on the specific implementation of a "T+1" settlement cycle in the first half of the year [1] Group 2 - The budget also outlines reforms to the ongoing regulatory framework for listed companies and provides specific guidelines for overseas companies seeking secondary listings in Hong Kong [1] - HKEX Chairman stated that the measures proposed in the budget will strengthen Hong Kong's position as a leading global financial center and demonstrate the government's commitment to enhancing the long-term competitiveness and resilience of Hong Kong's financial market [1] - The CEO of HKEX emphasized the importance of deepening market connectivity, building a diverse asset ecosystem, and enhancing market resilience and efficiency to maintain Hong Kong's status as an international financial hub [2]