Event
Key operating data in both the spot market and derivatives market improved in the third quarter from the previous quarter, with an average daily turnover (ADT) of HK $165.3 billion in the third quarter of 2021, up 17.2 per cent from a year earlier and 9.3 per cent from a month earlier. Taking into account north-south ADT and fee factors, "adjusted ADT" year-on-year + 13.6%, month-on-month ratio + 9.8%, of which southbound ADT year-on-year + 47.4%, month-on-month ratio + 12.4%, north-bound ADT year-on-year + 13.5%, month-on-month ratio + 35.6%. The average daily trading volume of futures and options (ADV) was 1.225 million, an increase of 6.4% year-on-year and 23.1% month-on-month. In the first three quarters, the amount of capital raised by initial public offerings reached HK $285.5 billion, an increase of 32% over the same period last year, and the total amount raised was HK $603.9 billion, an increase of 26% over the same period last year, demonstrating the continued strong financing capacity of the Hong Kong market as a whole.
Brief comment
Connectivity continues to expand, optimization and reform measures continue to be implemented, and interconnection is expected to be further expanded in the future. Nan Xiang Tong, a bond link, was officially opened on September 24, meeting the needs of the mainland market and at the same time promoting the development of Hong Kong's bond market. As we mentioned in "continuous Reform of the Bond Link and listing system and Q2 Prospect in the 21st year", the size of the bond market in Hong Kong is larger than that in the mainland, and with the opening of the "southbound Link", the bilateral effect will become more obvious, thus promoting the development of the bond markets of the two places and strengthening the role of the HKEx as an important and necessary connector for the gradual opening up of the capital market. Following the consultation on optimizing and simplifying the listing of overseas issuers in Hong Kong at the end of March, the HKEx issued a consultation document on September 17 to consult the market on the proposed implementation of the SPAC listing mechanism in Hong Kong. As mentioned in our previous report, SPAC has been popular in the United States since 2020 and has been widely concerned by issuers and investors. The relevant research and consultation conducted by the HKEx will help consolidate Hong Kong's position as an international financial centre and is expected to introduce more diversified financing and investment methods, thereby enhancing the liquidity of the market as a whole. In addition, Hong Kong is discussing with the mainland the expansion of the use of renminbi in Hong Kong stock trading and the introduction of renminbi-denominated trading in the stock market, which will further strengthen the position of HKEx.
Focus on the launch of MSCI A50 interconnection products. Q3 homing net profit is expected to be + 21%. We focus on the launch of MSCI A50 interconnection index futures products on October 18. Compared with the FTSE A50 interconnection index, the advantages of MSCI A50 interconnection index are: 1) the coverage industry is more scattered, and the target of interconnection is mainly interconnection, so the hedging effect is more obvious. 2) when issued by Hong Kong Exchanges and Clearing, it is easier to be accepted by foreign investors who trade the Shanghai and Shenzhen Stock Connect. According to the index point at the end of July (253.15), the price of a single MSCI A50 index futures is 6328.8 US dollars, with a correlation of 0.97 with MSCI A shares and Shanghai and Shenzhen 300 shares.
MSCI A50 index futures are trading at $15039 at the end of July, and FTSE A50 index futures are cheaper from the price of a single sheet.
We have adjusted the model according to the latest operating data. We expect the company's Q3 revenue to be HK $5.47 billion, year-on-year + 3.1% / month-on-month + 9.8%, and homing net profit to be HK $3.36 billion, unchanged from a year earlier and + 21.4% month-on-month. We expect 21 / 22 revenue of HK $21.63 billion and net profit of HK $130,000,000 respectively, maintaining the company's target price of HK $620, corresponding to a buy rating of 48 times PE in 2022.
Risk hint: the macro environmental impact is higher than expected, the overall Hong Kong market value recovery is not up to expectations, and the policy risk.