Goldman Sachs: Hong Kong Stock Exchange (00388) quarterly results exceeded expectations, with structural upside potential; reaffirms "Buy" rating.

Goldman Sachs has released a report stating that the Hong Kong Stock Exchange (00388) has structural upside potential, raising its operating expense forecast for 2026 to 2029 by 3%. The key factor is whether the related investments can transform into new revenue sources. The target price remains unchanged at HK$540, with a "Buy" rating, continuing to be included in the "Conviction Buy" list. In the second quarter, the Hong Kong Stock Exchange's earnings exceeded both the bank's and market expectations, partially driven by one-time gains from non-listed equity investments. Even excluding investment income, its earnings are still 7% higher than the bank's forecast, believed to be supported by better-than-expected performance in the spot business, although this was partially offset by weak derivatives income. Management noted that the IPO pipeline is strong, continuously converting to listing projects, and since 2025, new listed companies have contributed over 10% to the average daily trading volume. The bank believes that the record IPO pipeline and robust performance of new stocks will provide a solid foundation for growth in average daily trading volume in the second half of the year. Investors are focused on operating expense performance. Excluding the HK$90 million fine paid to the Financial Conduct Authority in the first half of 2025, core operating expenses increased by 9% year-on-year, with staff costs and IT-related expenses being the main driving factors, rising 10% and 8% year-on-year respectively, reflecting the Hong Kong Stock Exchange's continuous investment in capacity building to support the development of a multi-asset ecosystem.