CICC: Hong Kong Exchanges and Clearing Limited (00388) is expected to increase its net profit by 13% year-on-year in the second quarter, with a rating of "outperform industry."

CICC released a research report predicting that Hong Kong Exchanges and Clearing Limited (00388) will have a net profit of 5.04 billion Hong Kong dollars in the second quarter, a year-on-year increase of 13% and a quarterly decline of 3%. Hong Kong Exchanges is scheduled to disclose its quarterly results on August 19, with the bank predicting a 12% year-on-year increase in second-quarter revenue, a 1% quarterly decline to 8.11 billion Hong Kong dollars. Excluding investment income, core fee income is expected to increase by 26% year-on-year and by 2% quarterly to 6.95 billion Hong Kong dollars. Cumulatively, the company's total revenue and profit for the first half of the year are expected to increase by 16% and 20% year-on-year to 16.31 billion and 10.23 billion Hong Kong dollars, respectively. Considering the active trading volume of northbound trading link, the bank has raised its profit forecast for 2026 and 2027 by 2% and 3% to 19.6 billion and 20.9 billion Hong Kong dollars respectively. It maintains an outperform industry rating with a target price of 520 Hong Kong dollars. The report points out that the activity of spot trading continues to rise, and the activity levels of the Hong Kong stock market and northbound ADT have reached new highs. Core fee income in the second quarter is expected to increase by 26% year-on-year and by 2% quarterly. The average daily turnover is expected to increase by 22% year-on-year and by 5% quarterly to 289.5 billion Hong Kong dollars, with the average daily turnover of southbound trading link increasing by 10% year-on-year and by 1% quarterly to 123.7 billion Hong Kong dollars, accounting for 21.4% of the Hong Kong stock market, while the average daily turnover of northbound trading link is expected to increase by 141% year-on-year and by 13% quarterly to 366.1 billion RMB, accounting for 7.5% of the A-share market. Structural market trends in A-shares are driving the increase in northbound trading activity year-on-year. In terms of listings, a total of 44 IPOs were completed in the second quarter, raising 99.8 billion Hong Kong dollars, an increase of 10% year-on-year and a decrease of 10% quarterly, with the activity level of Hong Kong stock listings still at a high level. Additionally, as short-term interest rates rise and long-term interest rates fall, combined with a decline in market volatility, it is expected that investment income will be under pressure.