Core Viewpoint - CICC maintains the earnings forecast for Hong Kong Exchanges and Clearing Limited (HKEX) for 2025 and 2026, introducing a profit estimate of HKD 17.9 billion for 2027, with a target price of HKD 500, indicating a potential upside of 12.6% based on current P/E ratios [1] Group 1: Earnings Forecast - For Q4 2025, CICC predicts a year-on-year profit decline of 1% and a quarter-on-quarter decline of 24% [2] - Total revenue for Q4 2025 is expected to increase by 4% year-on-year but decrease by 15% quarter-on-quarter to HKD 6.61 billion, with core business revenue projected to rise by 13% year-on-year but fall by 13% quarter-on-quarter to HKD 5.81 billion [2] - Full-year total revenue is forecasted to grow by 27% to HKD 28.46 billion, with profit expected to increase by 31% to HKD 17.15 billion [2] Group 2: Trading Activity - In Q4 2025, the average daily trading (ADT) for Hong Kong stocks is expected to be HKD 229.8 billion, reflecting a year-on-year increase of 23% but a quarter-on-quarter decrease of 20% [2] - Southbound ADT is projected to rise by 35% year-on-year to HKD 105.7 billion, while northbound ADT is expected to remain flat year-on-year at HKD 231.1 billion [2] - Derivatives trading is anticipated to see a slight decline, with overall ADV down by 2% year-on-year and quarter-on-quarter to 1.61 million contracts [2] Group 3: Investment Income - CICC forecasts a significant drop in investment income for Q4 2025, with a year-on-year decline of 35% and a quarter-on-quarter decline of 25% [3] - The decline in investment income is attributed to reduced margin investment returns and external investment redemptions, alongside changes in margin interest rebate policies [3] Group 4: Long-term Value and Market Dynamics - The average daily trading for Hong Kong stocks has reached HKD 267.6 billion since the beginning of the year, indicating a 7% increase compared to the full year of 2025 [4] - CICC notes that for every HKD 10 billion increase in ADT in 2026, the year-on-year profit growth rate could increase by 2.4 percentage points [4] - The valuation trends of HKEX have historically aligned with the Hang Seng Index, but since September, HKEX has underperformed the index by 11 percentage points [4]