Breaking the upper and lower limits! The new settlement fee rules of Hong Kong Stock Exchange (00388) will soon take effect.

Hong Kong Stock Exchange (00388) will implement a new stock settlement fee structure starting from June 30, 2025, completely breaking the previous limit of a minimum of 2 Hong Kong dollars and a maximum of 100 Hong Kong dollars. According to the official WeChat account of HKEX, on February 21, 2025, HKEX announced the optimization of the stock settlement fee structure of the securities market to improve market efficiency and ensure that the fees are closely tied to the transaction amount. Ms. Liu Biyin, Chief Operating Officer and Group Chief Financial Officer of HKEX, previously stated, "HKEX is committed to providing a vibrant and efficient market for global investors. We are pleased to optimize the stock settlement fee structure, making the fees clearer and more consistent, fairer for transactions of different amounts, and allowing retail and institutional investors to execute their trading strategies more flexibly." Costs for small trades greatly reduced Stock settlement fees are charged by Hong Kong Securities Clearing Company Limited to its settlement participants for services related to obligation change, settlement guarantee, risk management, and net settlement. Specific adjustments are as follows: Original rules: 0.002% rate, minimum of 2 Hong Kong dollars per transaction, maximum of 100 Hong Kong dollars per transaction New rules: 0.0042% rate, removal of minimum/maximum limits It is reported that because the minimum fee has been removed, small trades (less than 47,600 Hong Kong dollars) will be more cost-effective under the new rules. For example: for a trade of 10,000 Hong Kong dollars, the original fee is 2 Hong Kong dollars, and the new fee is 0.42 Hong Kong dollars. If the transaction amount is greater than 47,600 Hong Kong dollars, the fee will increase. For example: for a trade of 1 million Hong Kong dollars, the original fee is 20 Hong Kong dollars, and the new fee is 42 Hong Kong dollars. Furthermore, the new rules remove the maximum limit of 100 Hong Kong dollars per transaction, meaning that the larger the transaction volume, the higher the fees. According to HKEX's data, under the new fee structure, about 77% of market transactions from 2019 to 2024 will pay lower fees. CICC stated that the core objective of this adjustment by HKEX is to address the structural problem of high costs for small trades and low costs for large trades, making the costs of transactions of different sizes more equitable. The decrease in costs for small trades directly lowers the trading threshold for retail and institutional investors, especially benefiting high-frequency trading, quantitative strategies, and small and medium investors, thereby promoting an overall increase in market activity. Analysts believe that this policy, coupled with the previous reform by the Hong Kong Stock Exchange to lower the minimum variation price (Minimum Spread), optimizes the microstructure of the market and enhances price discovery functions. HKEX's stock price rises over 44% within the year Data shows that as of the close on June 27, 2025, HKEX (00388) has risen by 44.91% within the year, reaching 421.2 Hong Kong dollars, a new high since October 7, 2024, with a total market value exceeding 530 billion Hong Kong dollars. Recently, Morgan Stanley released a research report stating that it has raised its target price for HKEX (0388) from 440 Hong Kong dollars to 500 Hong Kong dollars, an increase of 13.6%, while maintaining an "overweight" investment rating. This is mainly because the bank has raised its daily trading volume and profit forecasts for HKEX. Morgan Stanley believes that given the strong performance of HKEX since the beginning of the year and the increased confidence in the bottoming out of the financial system cycle, with strong daily trading volume and IPO activity, Hong Kong capital market activities will lean more towards the bank's previous bull market forecast. In early June, Goldman Sachs issued a research report stating that although the stock price of HKEX (0388) has risen by about 35% this year due to upward revisions in earnings per share and valuation expansion, its value is still undervalued relative to the recent strong level of market activity. The bank estimates that in the medium term, if more A-share companies list in Hong Kong, there is a potential increase of about 15% in the daily trading volume for the 2025 fiscal year, adjusting upward by 7% and 6% for the daily trading volume forecasts for 2026 to 2027, expected to reach approximately 240 billion and 258 billion Hong Kong dollars respectively, considering the possibility of a half chance. The bank expects that as more new stocks are listed, the market value of HKEX will continue to expand. The bank has raised its earnings forecasts for HKEX for the 2025 to 2027 fiscal years by 2%, 9%, and 10%, restating a buy rating and raising the target price from 398 Hong Kong dollars to 455 Hong Kong dollars. This article is reprinted from the "Wind Wand" public account, GMTEight editor: Li Fo.