Investment Rating - The report maintains a "Buy" rating for Hong Kong Exchanges and Clearing Limited (00388.HK) [1] Core Views - The company's performance slightly exceeded expectations, with record trading volumes across multiple markets [1] - In 2025, Hong Kong Exchanges achieved revenue of HKD 29.161 billion, a year-on-year increase of 30%, and a net profit attributable to shareholders of HKD 17.754 billion, up 36% year-on-year [1] - The report anticipates continued growth in net profit for 2026-2028, projecting HKD 20.155 billion, HKD 21.786 billion, and HKD 23.707 billion respectively, with corresponding EPS of HKD 15.91, HKD 17.17, and HKD 18.64 [4] Revenue Analysis - Trading fees in the cash market saw a significant increase, with average daily turnover reaching HKD 231.5 billion, a 93% year-on-year growth, and trading fee income rising by 87% [2] - The derivatives market reported a revenue increase of 11%, driven by a 55% rise in average daily turnover for structured products [2] - The LME (London Metal Exchange) achieved its best performance in history, with trading fees and settlement fees increasing by 11% and 12% respectively [2] Listing Fees - The primary market in Hong Kong was very active in 2025, with 119 new listings, an increase of 48 from the previous year, and a fundraising amount that grew by 226% [3] - Listing fee income in the derivatives market increased by 38%, attributed to a 50% and 27% rise in new listings of structured products and warrants respectively [3] Profit Forecast and Valuation - The report forecasts a net profit growth rate of 14%, 8%, and 9% for 2026, 2027, and 2028 respectively, with a corresponding PE ratio of 26, 24, and 22 times [4] - The expected revenue growth rates for the same period are 11%, 7%, and 8% [8]

Summary of Hong Kong Stock Exchange 2025 Earnings Call Company Overview - The report focuses on the Hong Kong Stock Exchange (HKEX) and its performance in 2025, highlighting significant growth in various segments and overall financial results. Key Financial Metrics - In 2025, HKEX achieved total revenue of HKD 29.161 billion, representing a year-on-year increase of 30% [1] - The net profit attributable to shareholders was HKD 17.754 billion, up 36% year-on-year [1] - For Q4 2025, the net profit attributable to shareholders was HKD 4.335 billion, reflecting a 15% increase year-on-year but a 12% decrease quarter-on-quarter due to a slight reduction in trading activity [1] Business Segment Performance - Revenue growth by business line in 2025: - Cash Market: +56% (50% of total revenue) - Derivatives: +11% (24% of total revenue) - Commodities: +14% (11% of total revenue) - Data & Connectivity: +7% (8% of total revenue) - Company Projects: +17% (7% of total revenue) [1] Revenue by Fee Structure - Revenue growth by fee type: - Trading and trading system fees: +44% (35% of total revenue) - Listing fees: +21% (6% of total revenue) - Clearing and settlement fees: +49% (24% of total revenue) - Custody and agency services fees: +31% (5% of total revenue) - Market data fees: +8% (4% of total revenue) - Investment income: +4% (18% of total revenue) [2] Trading Activity Highlights - Cash Market: - Daily average trading volume reached a record high of HKD 231.5 billion, up 93% year-on-year [2] - Daily average trading volume for Hong Kong Stock Connect and Shanghai Stock Connect increased by 151% and 42% respectively, with corresponding trading fee income rising by 156% and 44% [2] - Derivatives Market: - Revenue from the derivatives segment increased by 11% year-on-year, with trading fees for structured products like warrants and callable bull/bear contracts rising by 48% due to a 55% increase in daily average trading volume [2] - Commodities Market: - The London Metal Exchange (LME) achieved its best performance, with trading fees and clearing fees increasing by 11% and 12% respectively, driven by an 8% increase in daily average trading volume of fee-paying contracts [2] IPO and Listing Activity - The primary market in Hong Kong was highly active in 2025, regaining the top position in the global IPO market with 119 new listings, an increase of 48 companies year-on-year, and a fundraising amount that grew by 226% [3] - As of the end of 2025, there were 345 IPO applications in process, more than four times the number in 2024 [3] - Revenue from listing fees increased by 38% due to a 50% increase in new listings of structured products [3] Future Outlook - In January 2026, daily average trading volume is expected to grow by 89%, with structured products showing significant increases in trading volume [3] - The company anticipates a net profit growth of approximately 10% year-on-year for 2026, with a current price-to-earnings ratio of about 26x [3]

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]

Core Viewpoint - CICC maintains the earnings forecast for Hong Kong Exchanges and Clearing (00388) for 2025 and 2026, introducing a profit estimate of HKD 17.9 billion for 2027, with a target price of HKD 500, implying an upside of 12.6% based on current P/E ratios [1] Group 1: Earnings Forecast - For Q4 2025, earnings are expected to decline by 1% year-on-year and 24% quarter-on-quarter, with total revenue projected to increase by 27% year-on-year to HKD 28.46 billion and profit expected to rise by 31% to HKD 17.15 billion [2] Group 2: Trading Activity - Trading activity in the cash and derivatives markets is expected to show a marginal decline, with Q4 2025 cash market average daily turnover (ADT) projected at HKD 229.8 billion, a year-on-year increase of 23% but a quarter-on-quarter decrease of 20% [3] - The number of IPOs completed in Q4 is expected to be 48, with total financing amounting to HKD 97.6 billion, representing a year-on-year increase of 201% [3] Group 3: Investment Performance - Investment income is anticipated to decline by 35% year-on-year and 25% quarter-on-quarter due to a decrease in margin investment returns and external redemptions [4] Group 4: Long-term Value - The company emphasizes the dual resonance of "assets + funds" for long-term investment value, noting that if the cash market ADT increases by HKD 10 billion in 2026, the profit growth rate could increase by 2.4 percentage points [5]

Core Viewpoint - The report from CICC maintains the earnings forecast for Hong Kong Exchanges and Clearing Limited (HKEX) unchanged, with a target price of HKD 465, indicating an 11% upside potential based on projected P/E ratios [1] Group 1: Earnings Forecast and Performance - HKEX is expected to report a 2Q25 revenue of HKD 6.87 billion, reflecting a year-on-year increase of 27% and a quarter-on-quarter flat performance, with core fee income projected to rise by 30% year-on-year [1] - For the first half of the year, total revenue and profit are anticipated to increase by 29% and 34% respectively, reaching HKD 13.73 billion and HKD 8.20 billion [1] Group 2: Trading Activity Insights - The report highlights sustained high activity in spot and commodity trading, with a marginal decline in derivatives trading; 2Q average daily turnover (ADT) is expected to be HKD 238.1 billion, up 96% year-on-year [2] - The number of IPOs in 2Q reached 27, raising HKD 88.4 billion, marking a significant increase of 932% year-on-year [2] Group 3: Investment Income and Market Conditions - Investment income is projected to grow by 15% year-on-year to HKD 1.39 billion, driven by a favorable margin environment despite a decline in HIBOR rates [3] - The report notes that the decline in short-term interest rates may enhance margin income, supported by increased collateral requirements in a high-volatility market [3] Group 4: Long-term Growth Potential - The dual resonance of "assets + funds" is expected to enhance HKEX's mid-to-long-term value, with potential increases in market capitalization from "A+H" listings and the return of Chinese concept stocks [4] - If the average daily turnover reaches HKD 210 billion by 2025, HKEX's profit could grow by 18% to HKD 15.4 billion, with a projected CAGR of 14% for ADT over the next decade [4]