Morgan Stanley: HKEX's quarterly results far exceed expectations, target price HKD 508

Morgan Stanley published a research report indicating that Hong Kong Exchanges and Clearing (00388.HK) saw a 15% year-on-year increase in net profit in the fourth quarter of last year, which is 12% higher than market consensus and 17% higher than the bank's forecast, mainly due to net investment income and listing fees being stronger than expected. During the period, the average daily turnover increased by 23% year-on-year to HKD 230 billion, driving trading fees and settlement fees up by 13% and 15% year-on-year, respectively.

Due to stable margin levels and non-recurring income, net investment income rose by 2% year-on-year and 20% quarter-on-quarter, which is 52% higher than Morgan Stanley's forecast and 45% higher than market consensus. The EBITDA profit margin for the fourth quarter was 78%, up 3 percentage points year-on-year, benefiting from robust revenue growth and relatively stable operating expenses. The effective tax rate was 15.6%, in line with the bank's forecast.

The bank stated that it continues to see more investment opportunities in the second half of 2026, as there are more apparent signs of easing pressure from the producer price index on corporate profits, and market confidence is also improving. The fiscal budget for the 2026-27 fiscal year announced ongoing efforts to enhance market efficiency, including consultations on T+1 settlement in the first half of 2026 and consultations on revising listing requirements, which should support trading activities in the long term.

Morgan Stanley has given Hong Kong Exchanges and Clearing an "Overweight" rating, with a target price of HKD 508