First quarter 2022 results announced: the company's 2022Q1 realized total revenue of 4.69 billion Hong Kong dollars, down 21.3 percent from the same period last year; and realized home net profit of 2.668 billion Hong Kong dollars, down 30.5 percent from the same period last year. The decline in performance was mainly due to lower-than-expected deposit fee income and investment income, of which external portfolio investment income lost HK $189 million in the current period, compared with a profit of HK $159 million in the same period last year, plus the record high trading volume in the same period in 2021, due to cyclical factors and a high base.

Market trading volume and investment income were weak in the quarter: the average daily turnover of 2022Q1 in Hong Kong was HK $146.5 billion, down 35% from a year earlier and up 16% from a month earlier. In terms of months, the trading volume in January and February fell sharply compared with the same period last year, and the transaction volume on the motherboard declined by a higher margin compared with the same period last year; while the decline in March narrowed, and the corresponding transaction volume on the motherboard narrowed to-15% compared with the same period last year. It is mainly due to a narrowing year-on-year decline in transaction volume in the technology, financial and real estate industries, and in the short term, trading volume will still be under pressure. The futures business grew steadily, with the average number of daily contracts up 21% over the same period last year and 39% month-on-month. The average daily turnover of metal contracts in LME fee trading increased by 10 per cent compared with the same period last year, driving transaction fee income by + 6 per cent. There are 17 IPO companies in 22Q1 in a single quarter, raising HK $14.9 billion, which is only 17.3% and 4.5% of the total number of IPO enterprises and total funds raised in 2021. The net investment income is relatively weak, mainly due to the lag effect between the maturity of deposit investment and the rise in short-term interest rates, while the pooled investment plan portfolio recorded a net loss.

Short-term fluctuations do not change the long-term trend, and strategic planning continues to land: the company has clearly built itself into a "leading market for the future" on the Enterprise Open Day, and has formulated three strategies of "linking China to the world", "linking the present and the future" and "linking capital and opportunities". The core advantages of the company's unique geographical location and system remain unchanged, compared with overseas mature market exchanges. There is still room for continuous and rich expansion in the listing system, types of transactions, types of fee-based services, and so on. There have been more than 10 applications since the implementation of the SPAC system, and the new listing system for overseas issuers came into effect in January 2022. The optimization of the listing system will continue to undertake the return of Chinese stocks and the overseas listing demand of Chinese enterprises, resulting in incremental market capitalization and trading volume.

Lower the target price to HK $400 and maintain the buy rating: we still believe that the company will benefit from the increase in the capitalization rate of Chinese assets and the expansion of capital markets in the long term, but short-and medium-term results will still be affected by the sharp decline in market turnover. Although the dynamic price-to-earnings ratio of HKEx may remain below the center of the upstream channel for some time due to recent adverse macro factors, taking into account the long-term growth prospects and competitive advantages of HKEx, we separately adjust the company's annual revenue forecast for 22-23-24 to HK $22.1 billion / 24.2 billion / 27.3 billion. Adjust the net profit forecast to HK $13.4 billion / 14.8 billion / 16.8 billion and lower the target price for the next 12 months to HK $400, corresponding to 38 times PE in 2022, a 22.9 per cent increase from the current price, maintaining the buy rating.