UOB Kay Hian
Date of Report: Thursday, 18 September 2025
Hong Kong Exchanges and Clearing (HKEX): Surging Profits and Optimism Amid Booming Market Activity
Introduction: HKEX Poised for Record-Breaking Growth in 2025
Hong Kong Exchanges and Clearing (HKEX) is riding a wave of optimism on the back of robust trading volumes, a strong IPO pipeline, and progressive regulatory enhancements. With expectations of a significant jump in net profits and a bullish outlook for the next several years, HKEX is positioned as a standout performer in the Asian financial markets. This detailed analysis, based on the latest research by UOB Kay Hian, unpacks the numbers, drivers, and strategic changes that are propelling HKEX forward.
Key Highlights at a Glance
- 3Q25 net profit expected to surge by 47% year-on-year, underpinned by record-high average daily turnover (ADT).
- Hong Kong’s latest policy address targets further enhancement of listing rules and Connect schemes.
- Upward revisions to 2025–27 earnings forecasts, with a new target price of HK\$540.00 and a maintained BUY recommendation.
- Strong IPO pipeline with 240 active applications and several mega listings anticipated.
- Policy reforms and infrastructure improvements set to enhance market vibrancy and liquidity.
3Q25 Forecast: A Breakout Quarter for HKEX
| Metric |
3Q25F |
2Q25 |
3Q24 |
YoY Change |
QoQ Change |
| Total Revenue (HK\$m) |
7,441 |
7,219 |
5,372 |
+38.5% |
+3.1% |
| Core Revenue (HK\$m) |
6,352 |
5,538 |
4,140 |
+53.4% |
+14.7% |
| Net Investment Income & Other (HK\$m) |
1,088 |
1,682 |
1,232 |
-11.7% |
-35.3% |
| EBITDA (HK\$m) |
5,874 |
5,685 |
3,926 |
+49.6% |
+3.3% |
| Net Profit (HK\$m) |
4,613 |
4,442 |
3,145 |
+46.7% |
+3.8% |
Trading Volumes and Derivative Activity
- Headline ADT is expected at HK\$279.8 billion, surging 135.4% YoY and 17.7% QoQ.
- Stock F&O ADV up 22.8% YoY, reflecting increased investor activity.
- LME total ADV up slightly by 2.1% YoY, though down 10.5% QoQ.
- Southbound ADT has soared 2.8x YoY to HK\$148 billion, representing 26.5% of total headline ADT.
Financial Performance and Key Metrics: 2023–2027 Outlook
| Year (HK\$m) |
2023 |
2024F |
2025F |
2026F |
2027F |
| Net Turnover |
20,516 |
22,374 |
28,574 |
29,340 |
29,525 |
| EBITDA |
14,828 |
16,281 |
22,047 |
22,506 |
22,418 |
| Net Profit |
11,862 |
13,050 |
17,192 |
17,520 |
17,356 |
| EPS |
935.6 |
1,032.1 |
1,359.6 |
1,385.6 |
1,372.5 |
| PE |
49.0 |
44.4 |
33.7 |
33.1 |
33.4 |
| Dividend Yield (%) |
1.8 |
2.0 |
2.7 |
2.7 |
2.7 |
| Net Margin (%) |
58.5 |
59.2 |
60.9 |
60.4 |
59.4 |
| ROE (%) |
23.5 |
24.8 |
31.4 |
31.5 |
30.7 |
IPO Pipeline: An Unprecedented Surge in Listings
- In the first eight months of 2025, 59 new listings raised HK\$134.5 billion — a 5.8x increase year-on-year.
- Active IPO applications in the pipeline have surged to 240, surpassing the previous peak of 200 in August 2021.
- The pipeline is well diversified, including A+H listing candidates, first-time listings from Chinese companies, and secondary listings from overseas firms.
- Potential billion-dollar mega listings such as Chery Automobile, Zijin Gold, Mindray, and Shein are expected to further boost the market.
Regulatory and Policy Enhancements: New Catalysts for Growth
The Hong Kong government’s latest policy address is set to further bolster HKEX’s appeal. Key proposed enhancements include:
- Updating listing rules for companies with weighted voting right structures, potentially easing the path for China ADRs to pursue dual listings in Hong Kong.
- Continued discussions with mainland authorities to introduce offshore treasury bond futures, expand interest rate derivatives under Swap Connect, and include renminbi trading counters in Stock Connect.
These reforms target greater market accessibility, risk mitigation (especially amid US-China geopolitical tensions), and expanded product offerings.
Market Infrastructure: Strengthening Hong Kong’s Trading Backbone
- Initiatives to narrow minimum spreads and revise settlement fees for greater market efficiency.
- Improvements in margin collateral arrangements to align with global standards.
- Acceleration of the settlement cycle to T+1 and exploration of zero-days-to-expiry options.
- Potential extension of trading hours to further boost vibrancy.
ADT and Earnings Outlook: Upward Revision on Multiple Tailwinds
Consensus estimates for 2025 headline ADT stand at HK\$230 billion, but year-to-date figures are already at HK\$252 billion. The potential for upward revisions is clear, especially with anticipated US rate cuts, robust Southbound flows, and a healthy IPO pipeline.
| Assumption |
2025F Old |
2025F New |
Change (%) |
2026F Old |
2026F New |
Change (%) |
2027F Old |
2027F New |
Change (%) |
| Cash ADT (HK\$b) |
231.5 |
254.3 |
+9.8 |
219.1 |
268.6 |
+22.6 |
239.5 |
278.1 |
+16.1 |
| Futures ADV (‘000) |
803 |
801 |
-0.3 |
849 |
847 |
-0.2 |
904 |
902 |
-0.3 |
| Stock F&O ADV (‘000) |
860 |
871 |
+1.3 |
849 |
847 |
-0.2 |
989 |
1002 |
+1.3 |
| LME ADV (‘000) |
686 |
684 |
-0.2 |
719 |
718 |
-0.2 |
761 |
759 |
-0.2 |
Valuation and Recommendation: BUY with Upgraded Target Price
- BUY rating maintained, with a new target price of HK\$540.00 (up 4%).
- Target price derived from the dividend discount model, using a cost of equity of 8.7% and payout ratio of 90%.
- Implied 2026F PE at 39x, 0.5 standard deviations above historical mean; current valuation is 33x, just below the historical mean of 34x.
Profit & Loss, Balance Sheet, and Cash Flow Overview
| Metric |
2024F |
2025F |
2026F |
2027F |
| Net Turnover (HK\$m) |
22,374 |
28,574 |
29,340 |
29,525 |
| EBITDA (HK\$m) |
16,281 |
22,047 |
22,506 |
22,418 |
| Net Profit (HK\$m) |
13,050 |
17,192 |
17,520 |
17,356 |
| Operating Cash Flow (HK\$m) |
14,051 |
15,457 |
17,002 |
– |
| Dividend Payments (HK\$m) |
11,740 |
15,413 |
15,765 |
– |
| Net Debt/(Cash) to Equity (%) |
-22.5 |
-20.2 |
-17.1 |
-16.0 |
| ROE (%) |
24.8 |
31.4 |
31.5 |
30.7 |
HKEX Company Snapshot
- Bloomberg Ticker: 388 HK
- Shares Issued: 1,267.8 million
- Market Cap: HK\$580,669.3 million (US\$74,659.2 million)
- 3-month Avg Daily Turnover: 312.7 million shares
- 52-week High/Low: HK\$466.00/HK\$220.20
- The Government of Hong Kong SAR holds a 5.8% stake.
- FY25 NAV/Share: HK\$44.0
- HKEX maintains monopoly status as the operator of Hong Kong’s stock exchange, futures exchange, and related clearing houses.
Conclusion: HKEX Set to Capitalize on Market Momentum
HKEX’s 2025 outlook is one of robust earnings, strong cash flows, and strategic opportunity. With record ADT, a diversified and swelling IPO pipeline, supportive regulatory changes, and a re-energized trading infrastructure, HKEX is primed for sustained growth. Investors can expect continued upside, supported by an improved earnings forecast, resilient margins, and a commitment to market leadership.
Recommendation
The recommendation remains a firm BUY, with a target price of HK\$540.00, reflecting positive earnings revisions, lower cost of equity, and a valuation premium justified by HKEX’s strong fundamentals and growth prospects.
About the Analyst
Lead Analyst: Kenny Lim Yong Hui Contact: [email protected] Phone: +603 2147 1924
This comprehensive analysis provides investors and market watchers with a detailed, actionable view of the HKEX opportunity as it enters a new era of growth and innovation.
