CAITONG SECURITIES·2024-05-17 10:02Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The report highlights an improvement in overseas liquidity expectations and favorable policies for the Hong Kong stock market, which are expected to enhance trading activity and profitability for the Hong Kong Stock Exchange (HKEX) [3][27] - The report anticipates a recovery in average daily turnover (ADT) for HKEX, driven by supportive domestic policies and improved overseas liquidity [27] Summary by Sections Market Environment - The Hong Kong stock market experienced a strong rebound in April, with the Hang Seng Index increasing by 7.4%, the Hang Seng Tech Index by 6.4%, and the Hang Seng Financial Index by 9.6% [7] - The average daily turnover (ADT) for HKEX in April was HKD 112.3 billion, reflecting a month-on-month increase of 1.0% and a year-on-year increase of 3.1% [3][7] - Southbound trading showed significant growth, with a 3.8% month-on-month increase in ADT to HKD 38.1 billion [11][7] Macro Environment - The domestic economic fundamentals remain stable, with the manufacturing PMI at 50.4 in April, indicating continued expansion [20] - In the U.S., non-farm payrolls increased by 175,000 in April, which was below expectations, leading to a rise in market expectations for a potential interest rate cut by the Federal Reserve in September [20][24] Investment Recommendations - The report suggests that the combination of improved overseas liquidity and favorable policies for the Hong Kong stock market will lead to a recovery in trading activity, positively impacting HKEX's profitability and valuation [27] - The projected net profits for HKEX for 2024, 2025, and 2026 are HKD 12.44 billion, HKD 12.93 billion, and HKD 13.98 billion, respectively, with year-on-year growth rates of 4.9%, 3.9%, and 8.2% [27][30]