Investment Rating - The investment rating for Hong Kong Exchanges and Clearing Limited is "Buy" (maintained) [1] Core Views - The report highlights a significant improvement in ADT-linked business year-on-year, with a recovery in IPOs supporting growth [1] - The expected total revenue and net profit for 2024 are HKD 22.374 billion and HKD 13.050 billion, respectively, representing year-on-year growth of 9% and 10% [1] - The report anticipates a strong performance driven by the recovery of the IPO market and increased activity in the technology sector, suggesting a potential "double boost" in performance and valuation for the exchange [1][3] Summary by Sections Financial Performance - In 2024, the company achieved total revenue of HKD 22.374 billion and net profit of HKD 13.050 billion, with Q4 net profit reaching HKD 3.78 billion, up 46% year-on-year and 20% quarter-on-quarter [1] - Revenue from trading, settlement, and other income showed year-on-year increases of 18%, 21%, and slight declines in other categories [1] - The forecast for net profit for 2025-2027 is HKD 15.775 billion, HKD 15.571 billion, and HKD 16.141 billion, respectively, with corresponding EPS of HKD 12.44, HKD 12.28, and HKD 12.73 [1][4] Market Activity - The report notes a year-on-year increase in ADT for Hong Kong stocks, reaching HKD 1.32 trillion in 2024, up 26%, with northbound and southbound ADT increasing by 39% and 55%, respectively [2] - The IPO market showed signs of recovery, with 71 companies listed in 2024, raising HKD 88 billion, a 90% increase year-on-year [2] - The report emphasizes the role of new economy companies in driving market activity, with significant listings expected in the coming years [3] Valuation Metrics - The current P/E ratios for 2025-2027 are projected at 29.0, 29.4, and 28.4 times, respectively, indicating a favorable valuation outlook [1][4] - The report provides a financial summary indicating a steady growth trajectory in revenue and net profit, with a projected revenue increase of 22.56% in 2025 [4][9]

Financial Performance - Total revenue for the year ended December 31, 2024, was HKD 17,346 million, an increase of 12.3% from HKD 15,445 million in 2023[4] - Net profit for the year was HKD 13,155 million, representing a growth of 9.8% compared to HKD 11,981 million in 2023[6] - Basic earnings per share increased to HKD 10.32, up from HKD 9.37 in the previous year, reflecting a growth of 10.1%[4] - EBITDA for the year was HKD 16,281 million, an increase of 9.7% from HKD 14,828 million in 2023[4] - The company reported a total comprehensive income of HKD 13,127 million for the year, compared to HKD 12,087 million in 2023, indicating a growth of 8.6%[6] Revenue Breakdown - The total trading fees and system usage fees amounted to HKD 7,189 million, an increase of 18.2% from HKD 6,081 million in 2023[4] - The revenue from the equity securities and financial derivatives segment was HKD 9,120 million in 2024, up from HKD 7,913 million in 2023, marking a growth of approximately 15.3%[36][38] - The revenue from the commodities segment increased to HKD 2,562 million in 2024 from HKD 1,998 million in 2023, which is a significant rise of about 28.2%[36][38] - The data and connectivity segment generated revenue of HKD 2,122 million in 2024, compared to HKD 2,067 million in 2023, showing a slight increase of approximately 2.7%[36][38] Expenses and Liabilities - Operating expenses rose to HKD 5,761 million, up from HKD 5,441 million in 2023, marking an increase of 5.9%[4] - Total liabilities increased to HKD 327.222 billion, up from HKD 289.383 billion, reflecting a rise of 13.09%[8] - The group’s operating expenses totaled HKD 5,761 million in 2024, an increase from HKD 5,441 million in 2023, representing a rise of approximately 5.9%[36][38] Cash Flow and Investments - The net cash inflow from operating activities for the year ended December 31, 2024, was HKD 12,783 million, an increase of 13.2% from HKD 11,294 million in 2023[12] - The company invested HKD 1,604 million in fixed and intangible assets during the year, compared to HKD 1,386 million in 2023, indicating a 15.7% increase[12] - The company’s cash flow from investment activities showed a net inflow of HKD 3,194 million, a significant recovery from a net outflow of HKD 6,290 million in 2023[12] Assets and Equity - Total assets increased to HKD 381.629 billion as of December 31, 2024, up from HKD 341.179 billion in 2023, representing a growth of 11.85%[8] - The company’s retained earnings reached HKD 21.890 billion, an increase from HKD 19.723 billion, showing a growth of 11.03%[9] - The total equity attributable to shareholders of Hong Kong Exchanges increased to HKD 53.852 billion from HKD 51.344 billion, a rise of 4.88%[9] Dividends - The company declared an interim dividend of HKD 4.36 per share for the 2024 fiscal year, totaling HKD 5,513 million[11] - The total interim dividend declared for the fiscal year 2024 was HKD 11.706 billion, an increase from HKD 10.639 billion in 2023, marking an increase of approximately 10%[79] Taxation - Total tax expense for 2024 was HKD 1,698 million, an increase from HKD 1,351 million in 2023[70] - The weighted average applicable tax rate for 2024 was 16.9%, up from 16.4% in 2023[72] Employee Compensation - Employee costs increased to HKD 3,886 million in 2024 from HKD 3,564 million in 2023, representing a growth of 9.0%[53] - The total remuneration for the five highest-paid employees in 2024 was HKD 71,645 thousand, compared to HKD 65,489 thousand in 2023[67] Financial Assets and Credit Risk - The company’s financial assets measured at fair value through profit or loss increased to HKD 7.558 billion, up from HKD 6.961 billion, a growth of 8.57%[8] - The expected credit loss for financial assets is assessed using a simplified approach, with a total expected credit loss of HKD 8.38 billion as of December 31, 2024, down from HKD 17.57 billion in 2023[104] Governance and Management - The board of directors includes 12 independent non-executive directors, ensuring a diverse and experienced governance structure[3] - The group’s operating segments are reported in a manner consistent with internal management reports used for strategic decision-making[31] Strategic Initiatives - The company plans to continue expanding its market presence and investing in new technologies to enhance operational efficiency[3] - The group anticipates no significant impact from the adoption of HKFRS 19, HKFRS 7, and HKFRS 9 amendments[22]

Financial Performance - The total revenue for 2024 reached HKD 22,374 million, a 9% increase from HKD 20,516 million in 2023[9]. - The main business revenue was HKD 20,559 million, up 9% from HKD 18,941 million in the previous year[9]. - Shareholder profit attributable to shareholders increased by 10% to HKD 13,050 million from HKD 11,862 million in 2023[9]. - The basic earnings per share rose to HKD 10.32, a 10% increase compared to HKD 9.37 in 2023[9]. - The company reported an 18% increase in net investment income to HKD 1,748 million from HKD 1,487 million in 2023[9]. - The net profit attributable to shareholders for 2024 was 13.050 billion, a 10% increase from 11.864 billion in 2023[11]. - The total revenue and other income for the year 2024 reached a record high of HKD 224 billion, up 9% from 2023, leading to a record profit attributable to shareholders of HKD 131 billion, a 10% increase from 2023[21]. - The Group's net profit attributable to shareholders reached HKD 13.1 billion, a 10% increase from 2023[65]. - The total revenue and other income for 2024 reached 22,374 million, a 9% increase compared to 20,516 million in 2023[190]. - Operating profit for 2024 was 14,879 million, compared to 11,862 million in 2023, indicating a growth of 25%[190]. Trading Activity - In 2024, the average daily trading value of equity securities on the exchange reached 120.0 billion, a 29% increase from 93.2 billion in 2023[10]. - The average daily trading value of the Stock Connect (Shanghai and Shenzhen) reached 150.14 billion RMB in 2024, a 39% increase from 108.3 billion RMB in 2023[10]. - The average daily trading value of Hong Kong Stock Connect increased by 55% to 48.24 billion in 2024 from 31.1 billion in 2023[10]. - The average daily trading volume for fee-based transactions reached a new quarterly high, reflecting strong market activity[19]. - The average daily trading volume in the Hong Kong stock and derivatives market reached HKD 131.8 billion in 2024, a 26% increase from the previous year[39]. - The average daily trading volume in the derivatives market increased by 15%, reaching 1.6 million contracts[36]. - The average daily trading volume of ETPs reached a record high of HKD 18.9 billion in 2024, a 35% increase from HKD 14 billion in 2023[92]. - The average daily trading volume for stock options in 2024 was 720,297 contracts, an increase of 18% compared to 2023[132]. - The average daily trading volume for MSCI China A50 index futures reached 14,517 contracts, a 25% increase from 2023[135]. Market Expansion and New Initiatives - The company plans to open an office in Riyadh in 2025, marking a strategic expansion[5]. - The company has launched several new products, including the first virtual asset spot ETF in Asia on April 30[5]. - The company is focusing on enhancing its market structure and listing mechanisms to strengthen its position as a leading international financial center[4]. - The company expanded the range of eligible ETFs under the Stock Connect program, enhancing product and service diversity[23]. - The company is implementing a multi-year modernization plan for its cash platform to provide faster and more efficient post-trade services[26]. - The company plans to publish a white paper in the first half of 2025 to discuss suitable settlement cycles for the Hong Kong market[26]. - The Hong Kong Stock Exchange plans to enhance its market structure and infrastructure, with the first phase of lowering the minimum price fluctuation for eligible securities expected to start in mid-2025[46]. - The Hong Kong Stock Exchange launched a virtual asset index series in November 2024, supporting its goal to become a leading digital asset center in Asia[164]. Sustainability and ESG Efforts - The company aims to achieve carbon neutrality by the end of 2024 and has submitted science-based greenhouse gas reduction targets for verification[28]. - The company continues to enhance its market quality and sustainability efforts, maintaining strict regulatory standards and transparency[24]. - The Exchange's commitment to sustainable development includes a donation of HKD 86 million to various projects focused on financial education and environmental sustainability[30]. - The company established a new sustainability department in 2024 to enhance its sustainable development strategy[176]. - The company is committed to promoting ESG standards and has introduced climate information disclosure regulations aligned with IFRS S2, making Hong Kong the first market to implement such regulations through an exchange[48]. Operational Efficiency and Costs - The operating expenses for 2024 increased by 6% to 6.02 billion, primarily due to higher employee and IT costs[11]. - The Group's operating expenses increased by 6% to HKD 5.8 billion, primarily due to higher employee costs and IT expenses[65]. - Operating expenses increased by 10% to HKD 1,244 million, primarily due to hiring and salary adjustments[80]. - Employee-related expenses rose by HKD 322 million (9%) due to salary adjustments and strategic hiring[185]. - The Group plans to enhance market infrastructure and product offerings to maintain competitiveness and resilience in the face of macroeconomic challenges[66]. Investment and Financial Assets - The value of the Northbound Stock Connect portfolio increased by 11% to RMB 2.214 trillion by December 31, 2024[67]. - The total financial liabilities increased by 11% to 283,844 million in 2024 from 256,220 million in 2023[194]. - Financial assets totaled 303,984 million as of December 31, 2024, a 7% increase from 285,094 million in 2023[194]. - Cash and cash equivalents increased by 7% to 134,365 million in 2024 from 125,107 million in 2023[194]. - The external portfolio's fair value for diversified asset strategies reached 4,337 million HKD, reflecting a 6% increase from the previous year[196]. Regulatory and Compliance - Compliance monitoring actions included reviewing 66,074 issuer announcements in 2024, an increase from 62,578 in 2023[106]. - The number of enforcement cases handled in 2024 was 100, down from 123 in 2023[108]. - The number of complaints processed in 2024 was 880, slightly up from 845 in 2023[106]. - The number of monitoring actions taken regarding unusual stock price and trading volume changes was 7,050 in 2024, compared to 4,755 in 2023[106].

Investment Rating - The investment rating for Hong Kong Exchanges and Clearing Limited (388 HK) is "Buy" with a target price of HKD 404.00 [7][8]. Core Views - The report discusses the optimization of the securities market's transaction fee structure, which will eliminate the upper and lower limits on stock and ETP transaction fees, adjusting the new rates to 0.0042% and 0.0020% respectively, effective from June this year. This change is expected to balance transaction costs across different types of trades, potentially increasing revenue volatility for the exchange but having a minimal long-term impact on average fee rates [1][2]. Summary by Sections Transaction Fee Structure - The new fee structure will adjust the transaction fees for general exchange trades to 0.0042% for buyers and sellers, compared to the current rates of 0.0020% and 0.0010%. The minimum and maximum fees will be removed, which currently are HKD 2/1 and HKD 100/50 respectively. In comparison, the A-share market has a transaction fee rate of 0.001% [1][2]. Revenue and Profit Forecast - The report anticipates increased revenue volatility for the exchange due to the removal of fee limits, which will strengthen the correlation between transaction fees and trading volumes. It is estimated that 77% of trades could see reduced transaction costs under the new structure. The average effective transaction fee rate is projected to remain around 0.0042% over the 2019-2024 period, with an average transaction amount of approximately HKD 62,000 [2][4]. Market Activity - As of February 21, 2025, the average daily trading volume for the first quarter of 2025 reached HKD 200.3 billion, up from HKD 186.9 billion in the fourth quarter of 2024. This increase in trading activity is expected to support the exchange's performance and valuation [3]. Earnings and Valuation - The profit forecasts for the years 2024, 2025, and 2026 have been slightly adjusted to HKD 131 billion, HKD 132 billion, and HKD 133 billion respectively. The target price remains at HKD 404, based on a DCF model with a 50-year forecast period and a discount rate of 5% [4][6].

Investment Rating - The investment rating for Hong Kong Exchanges and Clearing Limited (00388.HK) is "Buy" (maintained) [1]. Core Views - The report highlights the optimization of the stock market settlement fee structure, which will not change the fee rate but will lower transaction costs for small trades, thereby promoting retail trading activity. The average fee rate is expected to remain unchanged, benefiting market liquidity [4][5]. - The report anticipates a recovery in trading sentiment for Hong Kong stocks, projecting an increase in average daily trading (ADT) volumes from 1,320 billion HKD in 2024 to 2,000 billion HKD in 2025, followed by a slight decline to 1,800 billion HKD in 2026. This is expected to lead to an increase in net profit forecasts for 2024-2026 [4][6]. - The report suggests that the active performance of technology stocks and a revival in Hong Kong IPOs will likely result in improved performance and valuation for the exchange, leading to a "Davis Double" effect [4][6]. Summary by Sections Financial Performance - The report provides financial projections indicating that revenue is expected to grow from 20,516 million HKD in 2023 to 28,040 million HKD in 2025, with a year-on-year growth of 24.1% in 2025 [7]. - Net profit is projected to increase from 12,986 million HKD in 2024 to 16,484 million HKD in 2025, reflecting a year-on-year growth of 26.9% [7]. - The report also includes estimates for earnings per share (EPS), which are expected to rise from 10.2 HKD in 2024 to 13.0 HKD in 2025 [7]. Market Activity - The report notes that the average daily trading volume (ADT) for Hong Kong stocks is expected to increase significantly, with projections of 1,320 billion HKD in 2024 and 2,000 billion HKD in 2025, indicating a strong recovery in market activity [4][6]. - The report highlights that the trading sentiment has improved, with recent data showing a substantial increase in ADT to 3,358 billion HKD, a year-on-year increase of 232% [5]. Valuation Metrics - The report provides valuation metrics, indicating that the price-to-earnings (P/E) ratio is expected to decrease from 34.2 in 2024 to 27.0 in 2025, suggesting potential for valuation improvement [7]. - The report also mentions that the current P/E ratio (TTM) stands at 37.5, which is within the 48th percentile of the past five years, indicating room for further valuation expansion [6].

Investment Rating - The report maintains an "Outperform" rating for the company [4][6]. Core Insights - The company operates as a crucial hub connecting Chinese and international capital markets, holding a near-monopoly position in Hong Kong's capital market [7][8]. - The business model is characterized by a light-asset approach with high gross margins, and the majority of profits are returned to shareholders through dividends [2][9]. - The company benefits from the revaluation of Chinese assets and the increasing attractiveness of Hong Kong stocks to mainland investors, which is expected to sustain trading activity [3][11]. Revenue and Financial Performance - For the first three quarters of 2024, the company reported total revenue of HKD 15.993 billion, with contributions from various business segments: cash business (39.7%), derivatives (28.2%), commodities (13.1%), data and connectivity (9.8%), and project income (9.2%) [8][19]. - The EBITDA for the same period was HKD 115.87 billion, reflecting a high EBITDA margin of 72.5% [2][9]. - The projected net profit for 2024-2026 is expected to grow at a compound annual growth rate (CAGR) of 16.5%, 11.5%, and 9.6% respectively [4][5]. Business Segments - The company’s operations are divided into four main segments: cash business, derivatives, commodities, and data services, each contributing significantly to overall revenue [8][19]. - The cash business primarily includes trading and settlement services for stocks, bonds, and ETFs, while the derivatives segment focuses on options and futures trading [8][21]. - The commodities segment, mainly operated through the London Metal Exchange, has shown stable trading volumes but lower profit contributions compared to other segments [42][44]. Market Dynamics - The report highlights the increasing role of southbound trading, which has become a significant driver of trading volume in Hong Kong, with southbound trading accounting for over 50% of total trading activity since early 2015 [3][11]. - The company is strategically positioned to benefit from ongoing capital market reforms and the expansion of mutual market access initiatives between Hong Kong and mainland China [11][12]. Future Outlook - The company is expected to maintain its competitive edge through continuous innovation in its service offerings and by enhancing its technological capabilities [11][12]. - The anticipated growth in trading volumes and the influx of new listings, particularly from high-quality Chinese companies, are expected to further bolster the company's revenue streams [25][26].

Group 1 - The Hong Kong Stock Exchange has proposed to lower the minimum price fluctuation for stocks in the Hong Kong securities market [1] - The decision to implement the changes will occur in two phases, with the first phase scheduled for mid-2025 [1] - After reviewing the implementation of the first phase, the second phase is expected to be launched in mid-2026 [1]

Investment Rating - The report maintains a **Buy** rating for Hong Kong Exchanges and Clearing Limited (HKEX) with a target price of **360 HKD**, representing a **16% upside** from the current price [3][10] Core Views - HKEX delivered **strong performance** in the first three quarters of 2024, with **revenue and other income** reaching **15.99 billion HKD** (YoY +2%), the **second-highest** in history [3] - **Net profit attributable to shareholders** increased by **5 million HKD** to **9.27 billion HKD**, driven by higher trading and clearing fees from **spot, derivatives, and commodity markets** [3] - **Spot market** revenue reached **6.35 billion HKD**, with **average daily turnover** growing **5% YoY** to **102.7 billion HKD**, supported by **economic stimulus measures** in mainland China and **global monetary easing** [3] - **Stock Connect** performance was robust, with **average daily turnover** rising **14% YoY** to **123.3 billion CNY**, contributing **1.78 billion HKD** in revenue (YoY +4%) [3][7] - **Derivatives market** saw **record-high average daily volume** of **1.516 million contracts** (YoY +12%), though revenue declined **12%** to **4.28 billion HKD** due to lower **margin investment income** [3] - **Commodities market** revenue surged **31% YoY** to **2.1 billion HKD**, driven by higher **LME trading and clearing fees** [3] - **Investment income** decreased **4% YoY** to **3.73 billion HKD**, primarily due to lower **margin requirements** and increased **interest rebates** to attract trading volume [3] Business Segment Performance - **Trading and trading system usage fees**: **4.98 billion HKD** (YoY +6%) [3] - **Clearing and settlement fees**: **3.18 billion HKD** (YoY +7%) [3] - **Listing fees**: **1.08 billion HKD** (YoY -6%) [3] - **Depository and agency services fees**: **890 million HKD** (YoY -1%) [3] - **Market data fees**: **810 million HKD** (YoY -2%) [3] - **Other income**: **1.26 billion HKD** (YoY +8%) [3] Financial Forecasts - **Revenue**: Expected to grow from **22.23 billion HKD** in 2024 to **24.38 billion HKD** in 2026 [10] - **Net profit**: Projected to increase from **12.77 billion HKD** in 2024 to **13.93 billion HKD** in 2026 [10] - **Diluted EPS**: Forecasted to rise from **10.07 HKD** in 2024 to **10.99 HKD** in 2026 [10] - **Dividend per share**: Anticipated to grow from **9.0 HKD** in 2024 to **9.9 HKD** in 2026 [10] Market Performance - **Average daily turnover** in the **Hong Kong market** reached **102.7 billion HKD** in the first three quarters of 2024, a **5% YoY increase** [3] - **Stock Connect average daily turnover** stood at **110.3 billion CNY** (YoY +4%), with **Southbound turnover** at **39.6 billion HKD** (YoY +37%) [8] - **Stock Connect revenue** accounted for **11%** of HKEX's total revenue and other income in the first three quarters of 2024 [9]

Group 1 - The Hong Kong Stock Exchange is preparing multiple optimization measures for the Stock Connect program, including the introduction of block trading and the inclusion of Real Estate Investment Trusts (REITs) [1] - The measures will also incorporate RMB stock trading counters into the Hong Kong Stock Connect [1] - These optimizations aim to provide more opportunities and choices for international and domestic investors in asset allocation [2]

Core Viewpoint - The Hong Kong Stock Exchange (HKEX) has released a white paper celebrating the tenth anniversary of the mutual market access between Mainland China and Hong Kong, emphasizing its commitment to further collaboration and enhancement of market connectivity [1] Group 1: Market Development - HKEX aims to continue working closely with Mainland partners and market participants under the guidance of regulatory authorities to enrich product categories and expand the range of underlying assets [1] - The exchange plans to continuously optimize the trading mechanisms and supporting services of the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect [1] Group 2: Investor Engagement - HKEX is exploring additional measures to enhance investor participation and convenience in the market [1] - The exchange is committed to improving arrangements for Bond Connect and Swap Connect to facilitate cross-border investment [1]