Summary of HK Exchanges & Clearing 4Q25 Preview Company Overview - **Company**: HK Exchanges & Clearing (0388.HK) - **Industry**: Financials, specifically focused on stock exchange operations in Hong Kong Key Points Revenue and Profit Outlook - Revenue and profit are expected to moderate in 4Q25 after a record high in 3Q25, with a projected revenue increase of 4% year-over-year (yoy) and a profit decline of 2% yoy due to sticky costs and a higher tax rate [1][9][12] - Trading and clearing fees are anticipated to increase approximately 12% yoy in 4Q25, while listing fees are expected to rise by 15% yoy, supported by new listings of Derivative Warrants (DW) and Callable Bull/Bear Contracts (CBBC) [3][9] Average Daily Turnover (ADT) Trends - The headline ADT for 4Q25 was HK$230 billion, reflecting a 23% increase yoy but a 20% decrease quarter-over-quarter (qoq) [3][15] - Cash Average Daily Volume (ADV) fell 20% qoq to HK$186 billion in December 2025, attributed to seasonal slowdown, but increased 23% yoy [3][9] - Southbound ADV dropped 29% qoq but rose 25% yoy, indicating its importance as a future growth driver [3][9] Derivatives Market Performance - Futures ADV declined 16% yoy and 1% qoq, while options ADV rose 8% yoy but fell 3% qoq [3][9] - Commodities ADV remained strong, increasing 23% yoy and 20% qoq [3] Net Investment Income - Net investment income is projected to decline to HK$800 million in 4Q25, down 33% yoy and 21% qoq, due to a smaller margin fund size and lower six-month HIBOR rates [4][9] Market Conditions and Future Outlook - Year-to-date (YTD) momentum remains strong, with YTD ADV rebounding to HK$274 billion as of February 11, 2026 [5] - The outlook for 2H26 appears supportive, with expectations of clearer signs of moderating Producer Price Index (PPI) pressure, which could enhance market sentiment and trading volume [5] Financial Metrics - Current market capitalization is HK$528.648 billion, with a price target of HK$508.00, indicating a potential upside of 22% from the current price of HK$418.00 [7] - Earnings per share (EPS) estimates for 2026 are projected at HK$13.54, with a price-to-earnings (P/E) ratio of 30.9 [7] Risks and Considerations - Potential risks include geopolitical uncertainties, regulatory changes affecting ADV, and the performance of the IPO pipeline [30] - Upside risks involve a sharp increase in market fundraising activity and improved liquidity conditions [30] Conclusion - HK Exchanges & Clearing is navigating a mixed performance landscape with a supportive outlook for 2026, driven by strong trading activity and new listings, despite challenges in net investment income and market volatility.