CICC has released a research report indicating that it is largely maintaining its earnings forecasts for Hong Kong Exchanges and Clearing Ltd (HKEX) (00388) for the 2026e and 2027e periods. The company is currently trading at 26.6x and 25.2x price-to-earnings ratios for the 2026e and 2027e estimates, respectively. CICC is keeping its "Outperform" rating and a target price of HK$520, which corresponds to 33.3x and 31.7x P/E ratios for the respective years, implying a 25.4% upside potential. HKEX's second-quarter 2026 earnings surpassed both the brokerage's and the market's expectations.

CICC's primary viewpoints are as follows:

HKEX's second-quarter 2026 earnings exceeded the firm's and market forecasts. Total revenue for the second quarter rose 18% year-on-year and 4% quarter-on-quarter to HK$8.50 billion. Excluding investment income, core fee-related revenue grew 29% year-on-year and 4% quarter-on-quarter to HK$7.14 billion. Net profit increased 21% year-on-year and 4% quarter-on-quarter to HK$5.38 billion, hitting a record high. This performance surpassed expectations, primarily driven by non-recurring gains from the revaluation of the company's unlisted equity investments. On a cumulative basis, first-half total revenue increased 19% year-on-year to HK$16.7 billion, with net profit climbing 24% year-on-year to HK$10.57 billion.

Trading and clearing revenue for the second quarter grew 33% year-on-year and 2% quarter-on-quarter. While cash market trading remained robust, derivatives and commodities showed a slight marginal pullback on a quarterly basis. In the cash market, trading and clearing revenue (including settlement instruction fees) increased 39% year-on-year and 6% quarter-on-quarter. This corresponds to a second-quarter average daily turnover (ADT) of HK$289.5 billion, up 22% year-on-year and 5% quarter-on-quarter. Southbound trading ADT rose 10% year-on-year and 1% quarter-on-quarter to HK$123.7 billion, accounting for 21.4% of total Hong Kong stock turnover. Northbound trading ADT surged 141% year-on-year and 13% quarter-on-quarter to RMB 366.1 billion, representing 7.5% of A-share turnover. In the derivatives segment, trading and clearing revenue grew 13% year-on-year but fell 7% quarter-on-quarter. Stock options average daily volume (ADV) increased 23% year-on-year and 1% quarter-on-quarter to 950,000 contracts, while stock index futures and options ADV rose 10% year-on-year but declined 5% quarter-on-quarter to 849,000 contracts. In the commodities sector, trading and clearing revenue increased 3% year-on-year but dropped 21% quarter-on-quarter, with LME ADV up 8% year-on-year but down 8% quarter-on-quarter to 837,000 contracts. Regarding listings, the second quarter saw 44 new IPOs completed, raising HK$102 billion in funds, up 12% year-on-year but down 8% quarter-on-quarter. As of the end of July, HKEX had 481 listing applications in process and 12 approved but not yet listed. The exchange continues to strengthen its efforts to attract companies from mainland China and overseas to list in Hong Kong, and CICC believes that the high level of IPO activity is likely to persist.

Margin investment is facing pressure, while one-off gains provide support to overall performance. Total investment income for the second quarter decreased 19% year-on-year and remained flat quarter-on-quarter at HK$1.36 billion. This included a non-recurring gain of HK$298 million from the revaluation of unlisted equity investments. Excluding the impact of non-recurring items, second-quarter investment income would have fallen 37% year-on-year and 22% quarter-on-quarter. Specifically, income from margin and clearing house funds declined 37% year-on-year and 24% quarter-on-quarter to HK$640 million. According to CICC's calculations, the average size of margin and clearing house funds in the second quarter grew 23% year-on-year but fell 1% quarter-on-quarter. The one-way downward movement in market indices, coupled with a marginal decline in metals trading activity, led to a quarterly contraction in margin fund sizes. Looking at key market interest rates, the second-quarter 2026 moving averages for 6-month, 1-month, and overnight HIBOR saw quarterly changes of -0.21 percentage points, +0.09 percentage points, and +0.34 percentage points, respectively. The rise in short-term rates alongside the decline in long-term rates resulted in a narrowing of margin interest spreads.

Key risks include regulatory uncertainty, geopolitical risks, and capital market performance falling short of expectations.