Western: Maintain a "buy" rating on HKEx (00388) as Q3 trading volume boosts company profits to record levels.

Western released a research report stating that it maintains a "buy" rating on the Hong Kong Stock Exchange (00388), optimistic about the deepening of mutual connectivity and the appreciation of the Renminbi, raising the 25-year net profit attributable to the parent company to HK$18 billion. The Hong Kong Stock Exchange released its third quarter report for 2025, with the company achieving operating income and net profit attributable to the parent company of HK$21.85 billion and HK$13.42 billion respectively in the first three quarters of 2025, an increase of 36.6% and 44.8% year-on-year; in the third quarter of 2025, the company achieved operating income and net profit attributable to the parent company of HK$7.78 billion and HK$4.90 billion respectively, an increase of 44.7% and 55.8% year-on-year, and 8% and 10% quarter-on-quarter, slightly exceeding the bank's previous expectations. The net profit attributable to the parent company in the third quarter reached a historical high. The report states that the record high trading volume in the Hong Kong spot market was the main driver of performance, with Hong Kong ranking first in global IPO fundraising in the first 10 months of the year. 1) In terms of the spot market, the average daily turnover of Hong Kong stocks reached approximately HK$256.4 billion in the first three quarters of 2025, an increase of 126.3% year-on-year. In the third quarter of 2025, the average daily turnover of Hong Kong stocks was approximately HK$286.4 billion, an increase of 142.3% year-on-year and 20% quarter-on-quarter; the northbound and southbound trading turnover reached HK$125.9 billion and RMB 206.4 billion respectively, an increase of 284.9% and 143.5% year-on-year. 2) In terms of new stocks, a total of 69 new stocks were listed on the Hong Kong stock market in the first three quarters of 2025, raising a total of HK$188.3 billion, an increase of 238.7% year-on-year. As of the end of October, IPO fundraising in the Hong Kong stock market exceeded US$26 billion, ranking first in the world. 3) The trading volume of derivatives and LME continued to grow in the first three quarters of 2025, with the average daily volume and commodity ADV increasing by 11% and 4% year-on-year respectively. The bank pointed out that the growth in investment income from margin trading is the main support for investment income. In order to raise funds for the headquarters property, the company fully redeemed external portfolios in the second quarter of 2025, with the investment income in the first three quarters of 2025 being dragged down by a 39% year-on-year decline in external portfolio income. With active trading, the company's margin trading scale in the first three quarters of 2025 increased by 47% year-on-year, driving a 16% increase in the company's margin investment income. The average overnight HIBOR in October rebounded from a low point of 0.02% at the end of June to 2.8%, but may still be volatile under the Fed's rate cuts, coupled with the redemption of external portfolios, which may have a certain impact on the company's annual investment income.