Company Reports

HKEX currently enjoys an extraordinarily privileged position, in that it holds an effective monopoly on facilitating the movement of capital between the world’s second-largest economy and the rest of the world, and its revenue is mainly driven by its trading volumes and the number of IPO listings. However, China has steadily increased its influence over Hong Kong in recent years, and Hong Kong has seen an outflow of both human and financial capital. Despite the volatility, both trading volume and listings have grown 89% and 68% in 2025 after the postpandemic recovery, and we think the trend is likely to continue as international investors become more interested in China. In addition, its Stock Connect program should generate incremental trading fees that should fall mostly to the bottom line given the business is capital-light. Stock Connect should not require additional infrastructure other than collateral holding mechanisms, for which the exchange already has the facilities. Postpandemic, revenue has increased, correlating with trading volume due to the incremental fees, and we do not expect disruptions as long as international investors remain drawn to Mainland Chinese companies.

HKEX currently enjoys an extraordinarily privileged position, in that it holds an effective monopoly on facilitating the movement of capital between the world’s second-largest economy and the rest of the world, and its revenue is mainly driven by its trading volumes and the number of IPO listings. However, China has steadily increased its influence over Hong Kong in recent years, and Hong Kong has seen an outflow of both human and financial capital. Despite the volatility, both trading volume and listings have grown 89% and 68% in 2025 after the postpandemic recovery, and we think the trend is likely to continue as international investors become more interested in China. In addition, its Stock Connect program should generate incremental trading fees that should fall mostly to the bottom line given the business is capital-light. Stock Connect should not require additional infrastructure other than collateral holding mechanisms, for which the exchange already has the facilities. Postpandemic, revenue has increased, correlating with trading volume due to the incremental fees, and we do not expect disruptions as long as international investors remain drawn to Mainland Chinese companies.

We transfer coverage of Hong Kong Exchanges and Clearing and assign a wide Morningstar Economic Moat and High Uncertainty Rating. We raise the fair value estimate to HKD 496 from HKD 420, which reflects a 28% upside based on the Sept. 25 closing price.

Hong Kong Exchanges and Clearing's second-quarter earnings per share increased 21%, driven by a 17% increase in revenue and operating expenses increasing 6%.

We expect Hong Kong Exchanges and Clearing's, or HKEx's, strategy for the foreseeable future to focus on ensuring that it can continue to serve as the gateway between China and the rest of the world. HKEx currently enjoys an extraordinarily privileged position, in that it holds an effective monopoly on facilitating the movement of capital between the world’s second-largest economy and the rest of the world. Maintaining this position requires a balance between access to China while maintaining a degree of autonomy. However, China has steadily increased its influence over Hong Kong in recent years, and Hong Kong has seen an outflow of some people, businesses, and capital. Counteracting this headwind has been HKEx’s increased expansion of the Connect program with the Shanghai Stock Exchange and Shenzhen Stock Exchange, which is creating financial highways between Hong Kong and China.

We expect Hong Kong Exchanges and Clearing's, or HKEx's, strategy for the foreseeable future to focus on ensuring that it can continue to serve as the gateway between China and the rest of the world. HKEx currently enjoys an extraordinarily privileged position, in that it holds an effective monopoly on facilitating the movement of capital between the world’s second-largest economy and the rest of the world. Maintaining this position requires a balance between access to China while maintaining a degree of autonomy. However, China has steadily increased its influence over Hong Kong in recent years, and Hong Kong has seen an outflow of some people, businesses, and capital. Counteracting this headwind has been HKEx’s increased expansion of the Connect program with the Shanghai Stock Exchange and Shenzhen Stock Exchange, which is creating financial highways between Hong Kong and China.

Hong Kong Exchanges and Clearing's first-quarter earnings per share increased 27%, driven by a 22% increase in revenue, as trading and clearing fees grew 18% and 33%, respectively. Operating expenses increased by a mere 2%.

Full-year earnings per share for HKEx increased 36%, driven by a 30% increase in revenue from nearly 50% growth in trading and clearing fees, while operating expenses grew just 5%.

We expect Hong Kong Exchanges and Clearing's, or HKEx's, strategy for the foreseeable future to focus on ensuring that it can continue to serve as the gateway between China and the rest of the world. HKEx currently enjoys an extraordinarily privileged position, in that it holds an effective monopoly on facilitating the movement of capital between the world’s second-largest economy and the rest of the world. Maintaining this position requires a balance between access to China while maintaining a degree of autonomy. However, China has steadily increased its influence over Hong Kong in recent years, and Hong Kong has seen an outflow of some people, businesses, and capital. Counteracting this headwind has been HKEx’s increased expansion of the Connect program with the Shanghai Stock Exchange and Shenzhen Stock Exchange, which is creating financial highways between Hong Kong and China.

We expect Hong Kong Exchanges and Clearing's, or HKEx's, strategy for the foreseeable future to focus on ensuring that it can continue to serve as the gateway between China and the rest of the world. HKEx currently enjoys an extraordinarily privileged position, in that it holds an effective monopoly on facilitating the movement of capital between the world’s second-largest economy and the rest of the world. Maintaining this position requires a balance between access to China while maintaining a degree of autonomy. However, China has steadily increased its influence over Hong Kong in recent years, and Hong Kong has seen an outflow of some people, businesses, and capital. Counteracting this headwind has been HKEx’s increased expansion of the Connect program with the Shanghai Stock Exchange and Shenzhen Stock Exchange, which is creating financial highways between Hong Kong and China.

Hong Kong Exchanges and Clearing, or HKEx, reported third-quarter results, with EPS up 45% on the prior year, driven by revenue increasing over 50%, while operating expenses grew a mere 9%.

We expect Hong Kong Exchanges and Clearing's, or HKEx's, strategy for the foreseeable future to focus on ensuring that it can continue to serve as the gateway between China and the rest of the world. HKEx currently enjoys an extraordinarily privileged position, in that it holds an effective monopoly on facilitating the movement of capital between the world’s second-largest economy and the rest of the world. Maintaining this position requires a balance between access to China while maintaining a degree of autonomy. However, China has steadily increased its influence over Hong Kong in recent years, and Hong Kong has seen an outflow of some people, businesses, and capital. Counteracting this headwind has been HKEx’s increased expansion of the Connect program with the Shanghai Stock Exchange and Shenzhen Stock Exchange, which is creating financial highways between Hong Kong and China.

HKEx reported stellar first-half results, with net profit after tax up 39% on the prior year, driven by a 33% increase in revenue, while operating expenses grew a mere 6%.

Hong Kong Exchanges and Clearing's first-quarter 2025 revenue is up more than 30% on a year ago, driven by 60% and 56% growth in trading and clearing, respectively. Revenue even outpaced the strong fourth quarter of 2024 by 7%.

We expect Hong Kong Exchanges and Clearing's, or HKEx's, strategy for the foreseeable future to focus on ensuring that it can continue to serve as the gateway between China and the rest of the world. HKEx currently enjoys an extraordinarily privileged position, in that it holds an effective monopoly on facilitating the movement of capital between the world’s second-largest economy and the rest of the world. Maintaining this position requires a balance between access to China while maintaining a degree of autonomy. However, China has steadily increased its influence over Hong Kong in recent years and Hong Kong has seen an outflow of some people, businesses, and capital. Counteracting this headwind has been HKEx’s increased expansion of the Connect program with the Shanghai Stock Exchange and Shenzhen Stock Exchange, which is creating financial highways between Hong Kong and China.

We raise our fair value estimate for wide-moat Hong Kong Exchanges and Clearing by 8% to HKD 325 per share with full-year results. The exchange saw significant acceleration in the fourth quarter, surpassing our expectations for material improvement on the third quarter. Over the trailing 12 months, the Hang Seng Index delivered double the performance of the S&P 500 or Nasdaq 100. This suggests to us that Hong Kong’s financial markets, which are highly leveraged to China’s economy, have awoken from their slump since early 2021.

We expect Hong Kong Exchanges and Clearing's, or HKEx's, strategy for the foreseeable future to focus on ensuring that it can continue to serve as the gateway between China and the rest of the world. HKEx currently enjoys an extraordinarily privileged position, in that it holds an effective monopoly on facilitating the movement of capital between the world’s second-largest economy and the rest of the world. Maintaining this position requires a balance between access to China while maintaining a degree of autonomy. However, China has steadily increased its influence over Hong Kong in recent years and Hong Kong has seen an outflow of some people, businesses, and capital. Counteracting this headwind has been HKEx’s increased expansion of the Connect program with the Shanghai Stock Exchange and Shenzhen Stock Exchange, which is creating financial highways between Hong Kong and China.

We maintain our HKD 300 fair value estimate for wide-moat HKEx following third-quarter 2024 results. The exchange looks to have recovered from its recent slump in trading activity, with the third quarter showing high-single-digit annual revenue growth, similar to the prior quarter. Moreover, new stimulus measures announced by the Chinese government around the end of the third quarter have more broadly sparked a rally in the Hang Seng Index and trading activity. This sets the exchange up for a strong last quarter, though the shares screen as slightly overvalued at current prices.

We maintain our HKD 300 per share fair value estimate for wide moat Hong Kong Exchanges and Clearing, or HKEx, following second-quarter results. The company reported continued momentum through the half, as equity markets are showing signs of life, despite China’s economy remaining weak. Core business revenue was up 7% year over year during the quarter, a significant improvement from the 7% decline reported in the first quarter. A relatively fixed cost-base helped lift core business EBITDA margin to 74%, from 72% in the first quarter. At current prices, the exchange’s share price screens as undervalued, which we attribute to the market being overly focused on the ongoing woes of China’s economy.

We expect Hong Kong Exchanges and Clearing's, or HKEx's, strategy for the foreseeable future to focus on ensuring that it can continue to serve as the gateway between China and the rest of the world. HKEx currently enjoys an extraordinarily privileged position, in that it holds an effective monopoly on facilitating the movement of capital between the world’s second-largest economy and the rest of the world. Maintaining this position requires a balance between access to China while maintaining a degree of autonomy. However, China has steadily increased its influence over Hong Kong in recent years and Hong Kong has seen an outflow of some people, businesses, and capital. Counteracting this headwind has been HKEx’s increased expansion of the Connect program with the Shanghai Stock Exchange and Shenzhen Stock Exchange, which is creating financial highways between Hong Kong and China.