Ge Long Hui·2025-08-21 19:30Core Viewpoint - Hong Kong Stock Exchange (HKEX) reported strong financial results for Q2 2025, with total revenue and profit exceeding expectations, driven by foreign exchange gains and miscellaneous income [1][2]. Financial Performance - Total revenue for Q2 2025 increased by 33% year-on-year and 5% quarter-on-quarter to HKD 72.2 billion, while main fee income rose by 31% year-on-year and 1% quarter-on-quarter to HKD 55.4 billion [1]. - Profit for Q2 2025 grew by 41% year-on-year and 9% quarter-on-quarter to HKD 44.4 billion, surpassing market expectations [1]. - For the first half of 2025, total revenue reached HKD 140.8 billion, up 33% year-on-year, and profit was HKD 85.2 billion, up 39% year-on-year [1]. Trading and Settlement Revenue - Trading and settlement revenue for Q2 increased by 40% year-on-year but decreased by 5% quarter-on-quarter [1]. - Spot trading revenue rose by 65% year-on-year but fell by 4% quarter-on-quarter, with average daily turnover (ADT) reaching HKD 2,377 billion [1]. - Northbound ADT increased by 19% year-on-year but decreased by 21% quarter-on-quarter, while southbound ADT surged by 154% year-on-year [1]. - Derivatives trading revenue saw a modest increase of 1% year-on-year but a significant decline of 14% quarter-on-quarter [1]. Investment Income - Total investment income for Q2 2025 increased by 31% year-on-year and 16% quarter-on-quarter to HKD 16.8 billion [2]. - Excluding non-recurring foreign exchange gains, investment income grew by 17% year-on-year and 6% quarter-on-quarter [2]. - Margin and clearing fund income rose by 25% year-on-year and 24% quarter-on-quarter to HKD 10.1 billion, driven by increased margin requirements and higher volumes in derivatives [2]. IPO Activity - In Q2 2025, HKEX completed 27 IPOs, raising HKD 907.5 billion, marking a significant increase of 960% year-on-year and 386% quarter-on-quarter [1]. - As of the end of July, there were 207 IPO applications in process, with 9 approved and awaiting listing, indicating continued high activity in the IPO market [1]. Earnings Forecast and Valuation - The earnings forecast for 2025 and 2026 has been raised by 7.3% and 4.0% respectively, now projected at HKD 165 billion and HKD 173 billion [2]. - The current trading multiples are 33x and 32x for 2025 and 2026 P/E, with a target price increase of 8% to HKD 500, reflecting a potential upside of 15.3% [2].