Key Takeaways:
BofA Securities cut its price target on HKEX to HKD500 from HKD520, citing lower interest income assumptions for 2027 and 2028.
"The lack of large-scale and influential IPO deals may raise concerns over future turnover growth and short-term liquidity," the BofA analysts said in a report.
HKEX is expected to report 1H26 net profit of HKD10.3 billion in mid-August, up 21 percent from a year earlier. Average daily turnover hit a record HKD289 billion in the second quarter, compared with HKD277 billion in the first quarter and HKD238 billion a year ago, driving strong growth in trading and clearing fee income. The broker cut its 2027-28 earnings forecasts by 2 percent to 10 percent on lower interest income assumptions, though higher HIBOR may partially offset the impact.
The new target implies 33 times projected 2026 earnings, while the stock currently trades at 25 times — a level BofA called attractive. The absence of IPOs from leading AI hardware companies is drawing attention as the Shanghai and Shenzhen markets attract multiple major tech listings.
IPO fundraising in the first half reached HKD210 billion, nearly double the HKD107 billion in the same period last year, while non-IPO fundraising totaled HKD136 billion versus HKD174 billion. The overall IPO pipeline remains strong, but the lack of mega deals may weigh on future turnover growth.
The People's Bank of China expanded the annual investment quota for Bond Connect Southbound Trading to RMB800 billion, and Hong Kong launched a central gold clearing system. While these initiatives may not significantly boost near-term earnings, they are expected to create long-term business opportunities for HKEX.
The target cut reflects a cautious view on HKEX's interest income trajectory, but the Buy rating signals confidence in the core exchange business. Investors will watch the 1H26 results in mid-August for updates on turnover trends and IPO pipeline momentum.
This article is for informational purposes only and does not constitute investment advice.
