UBS: Maintains "Neutral" rating for HKEX (00388), lowers target price to 306 Hong Kong dollars.

UBS released a research report stating that they gave a "neutral" rating to the Hong Kong Stock Exchange (00388). As for the forecast for average daily turnover (ADT) for this year and next year, it has been lowered from HK$146 billion and HK$162 billion to HK$121 billion and HK$133 billion, to reflect the lower expected index returns for this year. Correspondingly, earnings per share forecasts have also been lowered by 10% and 9%. The target price has been reduced from HK$346 to HK$306. The bank predicts that the Hong Kong Stock Exchange's net profit for the fourth quarter of last year will increase by 50% year-on-year to HK$3.9 billion, 5% higher than market expectations. This is mainly due to potentially higher-than-expected net investment income and a decrease in effective tax rate. They also forecast that quarterly revenue will increase by 34% year-on-year to HK$6.5 billion, slightly higher than market expectations. For the whole year, the bank estimates that the Hong Kong Stock Exchange's revenue and net profit will increase by 10% and 11% respectively, reaching HK$22.5 billion and HK$13.2 billion. In terms of market turnover, UBS estimates that the average daily turnover (ADT) of Hong Kong stocks in the fourth quarter will reach a record HK$187 billion, a 105% increase from the same period in 2023, and a 57% increase from the previous quarter. Although the Hong Kong stock market still faces challenges, UBS believes that the Fed rate cuts and the implementation of the lower limit on the Hong Kong securities market stock price at the end of last year will provide support for this year. They predict that the ADT for the first quarter could reach HK$128 billion, implying a 29% year-on-year increase.