[event] HKEx released its results for the first quarter of 2022: realized income and other income of HK $4.69 billion,-21% compared with the same period last year, and net profit of HK $2.668 billion, or-31% of the same period last year. We expect the decline to be mainly related to continued market volatility and continued geopolitical tensions.
The decline in the average daily trading volume in the spot market has led to a decrease in the income of the spot segment. In the first quarter of 2022, the spot segment realized revenue of HK $1.379 billion,-24% compared with the same period last year, accounting for 29% of the revenue. The average daily trading volume in the spot market fell 35 per cent to HK $146.5 billion from an all-time high a year earlier. The average daily trading volume in the northward direction is 105.9 billion yuan,-16% compared with the same period last year, and the average daily trading volume in the southward direction is 35.5 billion Hong Kong dollars, which is-42% in the same period last year. Bonds from north to north increased sharply in the first quarter, with an average daily turnover of 33.9 billion yuan, + 34% compared with the same period last year.
There are 17 IPO issues on the Stock Exchange, down 15 from the same period last year, with a total financing of HK $14.9 billion, or-89 per cent of the same period last year.
The first SPAC company was listed on the Hong Kong Stock Exchange on March 18, 2022, raising HK $1 billion.
The turnover of CBBCs and warrants and stock options on the Stock Exchange declined, and MSCI China A50 futures trading was active.
The equity securities and financial derivatives division earned HK $926 million in the first quarter of 2022,-8 per cent year-on-year. The average daily turnover of derivative warrants, CBBCs and warrants on the Stock Exchange is-22% compared with the same period last year, the average daily number of stock option contracts on the Stock Exchange is-23% compared with the same period last year, and the average daily number of derivative contracts on the Futures Exchange is + 21% compared with the same period last year. The number of newly listed derivative warrants increased by-19.7% compared with the same period last year, and the number of new CBBCs increased by-8% year-on-year. The average daily turnover of MSCI China A50 Interconnection Index futures in the first quarter was 21468, which was 86 per cent higher than the daily turnover in the period from launch to the end of 2021.
Commodity segment: revenue of HK $376 million in the first quarter of 2022, + 4.2% year-on-year. In the first quarter, the average daily trading volume of metal contracts for LME fee trading is + 10% compared with the same period last year, and the transaction fee is + 6% compared with the same period last year. The reason that the growth rate of transaction fee is lower than the trading volume is that the average fee per contract is reduced and the preferential rebate is increased.
Settlement income declined, margin investment income decreased. Settlement income in the first quarter of 2022 was HK $1.804 billion,-20% year-on-year, mainly due to a decrease in the number of transactions and a decrease in settlement fees for Shanghai Stock Connect and Shenzhen Stock Connect. The net margin investment income was-18%, but + 28% compared with the previous quarter, mainly due to higher interest rates on Hong Kong dollar and US dollar deposits in the first quarter.
Company project: revenue in the first quarter of 2022-HK $71 million, turning from profit to loss compared with the same period last year. The loss of the company's capital investment is mainly due to the fair value loss of the collective investment plan due to the changes in the fair value of listed equity securities and diversified assets. The net return on investment fell to-1.21% from 2.56% in the same period in 2021.
Fair value range of 379.8-403.6 Hong Kong dollars, maintaining the "better than the market" rating. We estimate that the total operating income of HKEx 22Universe 2324e is HK $24.5 billion, which is-1% of the same period last year. The net profit of shareholders belonging to HKEx is HK $123 / 13.6 billion, and the year-on-year net profit is-2%, 5% and 6% respectively.
Using the two-stage DDM to value the HKEx, the reasonable value range is HK $379.8-403.6, corresponding to 2022EPE of 39.1-41.6times. Maintain the "better than the market" rating.
Risk hint: the trading volume of spot and derivatives in Hong Kong has shrunk sharply; the progress of interconnection has stalled; the effect of LME reform is not as expected, and both volume and price have fallen.