Core Viewpoint - Goldman Sachs reports that Hong Kong Stock Exchange (HKEX) stock price has remained flat year-to-date, underperforming the Hang Seng Index, reflecting investor concerns over the decline in the quality of listing documents as pointed out by the Securities and Futures Commission, and worries regarding the moderate profit growth outlook for FY2026 due to high average daily trading volume and declining investment income [1] Group 1: Stock Performance and Market Sentiment - HKEX stock price has been flat year-to-date, lagging behind the Hang Seng Index [1] - Investor concerns are driven by the decline in the quality of listing documents and the pace of new listings [1] - The average daily trading volume is relatively high, contributing to worries about declining investment income [1] Group 2: Earnings Outlook and Valuation - Goldman Sachs maintains a "Buy" rating for HKEX with a target price of HKD 546 unchanged [1] - Despite concerns, there is optimism due to a rapid pace of new listings since February, with new listed companies showing strong stock performance, averaging a 64% increase [1] - Excluding investment income, HKEX is expected to see annual profit growth of 12% from FY2025 to FY2027, with a price-to-earnings growth ratio of 2.9 times, in line with regional peers [1] Group 3: Upcoming Financial Results - HKEX is scheduled to announce its Q4 FY2025 results on the 26th [1] - The expected net profit for Q4 is HKD 3.9 billion, which is 1% higher than previous forecasts and represents a 2% year-on-year increase [1] - Profit excluding investment income is anticipated to grow 14% year-on-year to HKD 2.9 billion [1]

Core Insights - The article highlights the top short-selling stocks in the market, with BYD Company Limited (81211) leading with a short-selling ratio of 100.00% [1][2]. Group 1: Short-Selling Ratios - BYD Company Limited (81211) has a short-selling ratio of 100.00% [2][3]. - JD.com (89618) follows with a short-selling ratio of 97.67% [2][3]. - Kuaishou Technology (81024) has a short-selling ratio of 80.79% [2][3]. Group 2: Short-Selling Amounts - Meituan (03690) has the highest short-selling amount at 2.11 billion [2]. - Alibaba Group (09988) follows with a short-selling amount of 1.673 billion [2]. - Xiaomi Corporation (01810) has a short-selling amount of 1.482 billion [2]. Group 3: Deviation Values - BYD Company Limited (81211) has the highest deviation value at 44.67% [3]. - Jinfang Pharmaceutical (02595) has a deviation value of 35.39% [3]. - Kuaishou Technology (81024) has a deviation value of 34.76% [3].

Market Overview - The Hong Kong stock market experienced a decline, with the Hang Seng Index falling by 1.72% to 26,567.12 points, the Hang Seng Tech Index down by 0.90% to 5,360.42 points, and the National Enterprises Index decreasing by 1.55% to 9,032.71 points [1] - The Hang Seng Index opened lower at 26,640.16 points, dropped by 392.38 points, and ultimately closed down by 465.42 points, with a total trading volume exceeding 257.5 billion HKD [1] - The southbound trading (Hong Kong Stock Connect) saw a net inflow of over 20.2 billion HKD [1] Sector Performance - Overall, sectors such as chips and department stores saw gains, while new consumption, new energy vehicles, and telecommunications had mixed results. Conversely, sectors like gold, non-ferrous metals, biomedicine, port transportation, technology, oil and gas, brokerage, and banking mostly experienced declines [1] Individual Stock Movements - Notable stock movements included Xiaomi Group increasing by 0.88%, AIA Group decreasing by 4.18%, Zijin Mining falling by 7.64%, Hong Kong Exchanges and Clearing down by 2.13%, and Semiconductor Manufacturing International Corporation rising by 0.79% [1] - Ctrip Group-S dropped by 2.10%, Pop Mart fell by 1.90%, while Tian Shu Zhi Xin surged by 14.59% and Zhi Pu increased by 20.65% [1] - China Construction Bank decreased by 1.49%, China Resources Land fell by 2.52%, and Lao Pu Gold dropped by 3.97%, while Guotai Junan International rose by 4.61% and China Petroleum & Chemical Corporation fell by 4.33% [1] Top Traded Stocks - The top three traded stocks included Tencent Holdings, which fell by 0.65% with a trading volume exceeding 14.2 billion HKD; Alibaba, down by 2.02% with over 10.8 billion HKD in transactions; and Meituan, which decreased by 3.18% with a trading volume of over 8.1 billion HKD [2]

Investment Rating - The report maintains a "Buy" rating for Hong Kong Exchanges and Clearing Limited (388 HK) with a target price of HKD 542 [7]. Core Insights - The report anticipates a decline in average daily trading (ADT) leading to a 24% quarter-on-quarter drop in net profit for 4Q25, with total revenue expected to be HKD 6.456 billion, reflecting a 17% decrease from the previous quarter [1][5]. - Despite the expected short-term challenges, the report suggests that factors such as the appreciation of the Renminbi, potential interest rate cuts by the Federal Reserve, and a strong IPO market will support liquidity in the Hong Kong stock market, benefiting the exchange's performance and valuation [1][2]. Summary by Sections Trading - The report estimates trading revenue for 4Q25 at HKD 42.1 billion, a 16% decrease quarter-on-quarter, primarily due to a 20% decline in ADT to HKD 2.298 billion [2]. - Southbound trading activity has also decreased, with a 31% drop in southbound ADT to HKD 529 billion, accounting for 23% of total ADT [2]. IPO Market - The IPO market remains robust, with 50 IPOs expected in 4Q25, raising HKD 980 billion, compared to 25 IPOs and HKD 790 billion in the previous quarter [3]. - The report highlights a strong pipeline of high-quality IPOs, with 395 companies currently awaiting approval [3]. Investment Income - Net investment income is projected to decline by 32% quarter-on-quarter to HKD 6.97 billion due to changes in margin rebate calculations and a high overnight HIBOR environment [4]. - The report notes that the reduction in margin requirements may also lead to a contraction in the investment income base [4]. Profit Forecast and Valuation - The report adjusts the net profit forecasts for 2025, 2026, and 2027 to HKD 171 billion, HKD 185 billion, and HKD 188 billion respectively, with a target price based on DCF methodology set at HKD 542 [5][14].

Market Overview - The Hang Seng Index fell by 465.42 points, a decrease of 1.72%, closing at 26,567.12 points [1] - The total turnover on the main board was HKD 257.578 billion [1] - The Hang Seng China Enterprises Index dropped by 142.47 points, closing at 9,032.71 points, a decline of 1.55% [1] - The Hang Seng Tech Index decreased by 48.56 points, closing at 5,360.42 points, down by 0.9% [1] Blue-Chip Stocks - Tencent Holdings fell by 0.65%, closing at HKD 532 [1] - Hong Kong Exchanges and Clearing decreased by 2.13%, closing at HKD 405.2 [1] - China Mobile remained unchanged, closing at HKD 78.2 [1] - HSBC Holdings dropped by 2.72%, closing at HKD 135.7 [1] Local Hong Kong Stocks - Cheung Kong Holdings decreased by 0.59%, closing at HKD 46.9 [1] - Sun Hung Kai Properties increased by 0.15%, closing at HKD 133.7 [1] - Henderson Land Development fell by 1.04%, closing at HKD 32.4 [1] Chinese Financial Stocks - Bank of China decreased by 1.48%, closing at HKD 4.65 [1] - China Construction Bank fell by 1.49%, closing at HKD 7.96 [1] - Industrial and Commercial Bank of China dropped by 1.38%, closing at HKD 6.41 [1] - Ping An Insurance decreased by 2.16%, closing at HKD 70.35 [1] - China Life Insurance fell by 3.67%, closing at HKD 33.08 [1] Oil and Petrochemical Stocks - China Petroleum & Chemical Corporation dropped by 5.12%, closing at HKD 5.37 [1] - China National Petroleum Corporation fell by 4.33%, closing at HKD 9.05 [1] - CNOOC Limited decreased by 3.5%, closing at HKD 24.24 [1]

Core Viewpoint - The Hong Kong IPO market is experiencing a surge, and the Hong Kong Stock Exchange (HKEX) is considering allowing more companies to submit IPO applications confidentially to maintain its leading position as a global listing center [1] Group 1: Proposed Changes - The proposal aims to expand the scope of confidential applications beyond just technology and biotech sectors to include traditional industries [1] - A market consultation document is expected to be released by HKEX by the end of February, which will include these suggestions [1] - The content and timing of the document may be adjusted around the Lunar New Year holiday and the upcoming fiscal budget announcement [1] Group 2: Current Confidential Application Criteria - Currently, only overseas-listed companies with a market capitalization of at least 10 billion HKD and strong performance, as well as biotech or advanced technology companies, can submit confidential IPO applications [1] - This confidentiality is intended to protect research-intensive companies from the risks associated with early disclosure [1] - Other issuers are required to disclose detailed business overviews, audited financial statements, and equity structures months before listing, which has deterred some companies concerned about the uncertainty of the listing window [1] Group 3: Regulatory Response - The Hong Kong Securities and Futures Commission (SFC) declined to comment on the matter but stated it will continue to work closely with HKEX to explore measures to enhance the competitiveness of the Hong Kong listing market [1] - The goal is to ensure that Hong Kong remains the preferred listing destination for quality enterprises [1]

Summary of HK Exchanges & Clearing 4Q25 Preview Company Overview - **Company**: HK Exchanges & Clearing (0388.HK) - **Industry**: Financials, specifically focused on stock exchange operations in Hong Kong Key Points Revenue and Profit Outlook - Revenue and profit are expected to moderate in 4Q25 after a record high in 3Q25, with a projected revenue increase of 4% year-over-year (yoy) and a profit decline of 2% yoy due to sticky costs and a higher tax rate [1][9][12] - Trading and clearing fees are anticipated to increase approximately 12% yoy in 4Q25, while listing fees are expected to rise by 15% yoy, supported by new listings of Derivative Warrants (DW) and Callable Bull/Bear Contracts (CBBC) [3][9] Average Daily Turnover (ADT) Trends - The headline ADT for 4Q25 was HK$230 billion, reflecting a 23% increase yoy but a 20% decrease quarter-over-quarter (qoq) [3][15] - Cash Average Daily Volume (ADV) fell 20% qoq to HK$186 billion in December 2025, attributed to seasonal slowdown, but increased 23% yoy [3][9] - Southbound ADV dropped 29% qoq but rose 25% yoy, indicating its importance as a future growth driver [3][9] Derivatives Market Performance - Futures ADV declined 16% yoy and 1% qoq, while options ADV rose 8% yoy but fell 3% qoq [3][9] - Commodities ADV remained strong, increasing 23% yoy and 20% qoq [3] Net Investment Income - Net investment income is projected to decline to HK$800 million in 4Q25, down 33% yoy and 21% qoq, due to a smaller margin fund size and lower six-month HIBOR rates [4][9] Market Conditions and Future Outlook - Year-to-date (YTD) momentum remains strong, with YTD ADV rebounding to HK$274 billion as of February 11, 2026 [5] - The outlook for 2H26 appears supportive, with expectations of clearer signs of moderating Producer Price Index (PPI) pressure, which could enhance market sentiment and trading volume [5] Financial Metrics - Current market capitalization is HK$528.648 billion, with a price target of HK$508.00, indicating a potential upside of 22% from the current price of HK$418.00 [7] - Earnings per share (EPS) estimates for 2026 are projected at HK$13.54, with a price-to-earnings (P/E) ratio of 30.9 [7] Risks and Considerations - Potential risks include geopolitical uncertainties, regulatory changes affecting ADV, and the performance of the IPO pipeline [30] - Upside risks involve a sharp increase in market fundraising activity and improved liquidity conditions [30] Conclusion - HK Exchanges & Clearing is navigating a mixed performance landscape with a supportive outlook for 2026, driven by strong trading activity and new listings, despite challenges in net investment income and market volatility.

Core Viewpoint - Morgan Stanley forecasts that Hong Kong Stock Exchange (HKEX) will see a decline in revenue and profit in Q4 2025 compared to the historical high in Q3 2025, with a projected year-on-year profit drop of 2% due to rising cost stickiness and increased tax rates [1] Group 1: Financial Performance - HKEX's average daily trading volume for Q4 2025 is estimated at HKD 230 billion, reflecting a year-on-year increase of 23% but a quarter-on-quarter decrease of 20% [1] - The average daily trading volume for futures is expected to decline by 16% year-on-year, while options trading volume is projected to rise by 8% [1] - Revenue for Q4 2025 is anticipated to grow by 4% year-on-year, primarily driven by approximately 12% growth in core business, although weak net investment income will partially offset this growth [1] Group 2: Future Outlook - Morgan Stanley expects that January's market activity will be relatively active, providing support for HKEX's performance throughout 2026 [1] - The second half of 2026 is anticipated to bring favorable conditions for HKEX, supported by sustained market activity and signs of easing PPI pressure [1]

Core Viewpoint - Morgan Stanley anticipates that Hong Kong Exchanges and Clearing Limited (HKEX) will see a decline in revenue and profit in Q4 2025 from the historical high in Q3 2025, despite a relatively active market in January providing support for this year's performance [1] Revenue and Profit Forecast - The firm estimates that HKEX's profit in Q4 2025 will decrease by 2% year-on-year, influenced by cost stickiness (up 7% year-on-year) and an increase in tax rate due to minimum tax requirements [1] - Q4 2025 average daily turnover is projected to be HKD 230 billion, representing a 23% year-on-year increase but a 20% quarter-on-quarter decline [1] Trading Volume Insights - Daily trading volume for futures is expected to decline by 16% year-on-year, while daily trading volume for options is anticipated to increase by 8% year-on-year [1] Revenue Growth Drivers - Q4 revenue is expected to grow by 4% year-on-year, driven by approximately 12% growth in core business, although this will be partially offset by weak net investment income [1] Net Investment Income Outlook - Morgan Stanley predicts that HKEX's net investment income will decline year-on-year and quarter-on-quarter, primarily due to a reduction in the scale of margin funds [1] Rating and Target Price - The rating for HKEX is set at "Overweight" with a target price of HKD 508 [1]

Core Viewpoint - Morgan Stanley anticipates that Hong Kong Exchanges and Clearing Limited (HKEX) will see a decline in revenue and profit from the historical high in Q3 2025, with a supportive market activity expected in January this year [1] Group 1: Financial Performance Expectations - The firm estimates that HKEX's profit for Q4 2025 will decrease by 2% year-on-year, influenced by cost stickiness (up 7% year-on-year) and an increase in tax rate due to minimum tax requirements [1] - Morgan Stanley projects an average daily turnover of HK$230 billion for HKEX in Q4 2025, representing a 23% year-on-year increase but a 20% quarter-on-quarter decline [1] - Revenue for Q4 is expected to grow by 4% year-on-year, driven by approximately 12% growth in core business, partially offset by weak net investment income [1] Group 2: Trading Volume Insights - The average daily trading volume for futures is projected to decline by 16% year-on-year, while options trading volume is expected to increase by 8% year-on-year [1] - The anticipated decline in net investment income is primarily due to a reduction in the scale of margin funds [1]