Soochow: Maintaining a "buy" rating on HKEX (00388), with the IPO fundraising amount ranking first in the world.

Soochow issued a research report stating that it maintains a "buy" rating on HKEX (00388). The Hong Kong market is active in trading, and it is expected that the momentum of IPO issuance will continue to rise. Soochow is optimistic about the simultaneous optimization of HKEX alpha and beta, further realizing the development prospects. The firm made a slight adjustment to its previous profit forecast, estimating that HKEX's shareholders' net profit for 2026-2027 will be 18.966 billion and 20.512 billion Hong Kong dollars respectively. The estimated shareholders' net profit for the company in 2028 will be 22.415 billion Hong Kong dollars, corresponding to growth rates of 7%, 8%, and 9% respectively. The current stock price corresponds to PE valuations of 27.8x / 25.7x / 23.5x. Key points from Soochow: Events HKEX released its 2025 performance: 1) Achieved revenue and other income of 29.2 billion Hong Kong dollars, a year-on-year increase of 30%, and a net profit attributable to equity holders of 17.8 billion Hong Kong dollars, a year-on-year increase of 36%. The annual performance reached a record high, with significant growth mainly due to improved investment sentiment supported by mainland policies, increased participation of mainland investors in offshore markets, and a significant increase in trading volume in the Hong Kong stock cash market; Hong Kong IPO fundraising amount ranked first globally. ROE in 2025 was 33.2%, a year-on-year increase of 7.3 percentage points. 2) Achieved revenue and other income of 7.3 billion Hong Kong dollars in the fourth quarter, a year-on-year increase of 15%, and a decrease of 6% quarter-on-quarter; net profit attributable to equity holders of 4.3 billion Hong Kong dollars, a year-on-year increase of 15%, and a decrease of 12% quarter-on-quarter. Record high trading volume In 2025, the spot market division achieved revenue of 14.7 billion Hong Kong dollars, a year-on-year increase of 56%, accounting for 50% of the revenue. 1) The average daily trading volume in the spot market increased by 93% year-on-year to 232 billion Hong Kong dollars. The daily average turnover of the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect was 212.4 billion yuan and 121.1 billion Hong Kong dollars respectively, an increase of 42% and 151% respectively. Bond Connect Northbound daily average trading volume was 39 billion yuan, a decrease of 6% year-on-year. 2) The Stock Exchange issued 119 IPOs, an increase of 68% year-on-year, with a total financing amount of 286.9 billion Hong Kong dollars, an increase of 226% year-on-year. By the end of 2025, the number of Hong Kong IPOs in the queue had nearly tripled year-on-year. Continued growth in trading volume of derivatives market In 2025, the stock securities and financial derivatives division achieved revenue of 6.9 billion Hong Kong dollars, a year-on-year increase of 11%, mainly due to an increase in structured product trading and listing activities, as well as record high trading volumes in the derivatives market. The average daily trading volume of derivative products reached 1.66 million contracts, an increase of 7% year-on-year. The daily average trading volume of Stock Exchange Bull Bear Certificates and Warrants increased by 55% to 18.3 billion Hong Kong dollars year-on-year. The average daily trading volume of futures exchange derivative contracts and Stock Exchange options contracts decreased by 6% and increased by 22% respectively. The number of newly listed warrants and bull bear certificates increased by 50% and 27% respectively. Commodities division In 2025, revenue was 3.2 billion Hong Kong dollars, a year-on-year increase of 14%. The average daily transaction amount of LME fee transactions in 2025 increased by 8% year-on-year. Data and Connectivity division In 2025, revenue was 2.3 billion Hong Kong dollars, a year-on-year increase of 7%, mainly due to an increase in the use of the Exchange Participants using the Huatai Star/Central Trading Gateway, with network fees increasing by 12%. In addition, an increase in customer usage led to an 8% increase in equipment hosting service fees. Company projects In 2025, revenue from company projects was 2.2 billion Hong Kong dollars, a year-on-year increase of 17%. Internal investment income was 1.9 billion Hong Kong dollars, a year-on-year increase of 7%. The annualized net investment return in 2025 was 5.06%, a decrease of 3 basis points year-on-year. The average fund balance of the company increased by 8% to 37 billion Hong Kong dollars. Risk warning Significant shrinkage in spot and derivative trading volume in Hong Kong; stagnation in the progress of mutual market connectivity; LME reform fails to meet expectations, with both volume and price declining.