High-frequency data on market transactions: Despite a reversal in market conditions in late September, the turnover of various assets declined month-on-month in the third quarter due to the previous market slump. 3Q2024 HKEx ADT was HK$118.8 billion, -2.3%/+20.7% month-over-year; ADV for stock options was 0.705 million, -5.7%/+19.2% month-over-year, and 0.781 million futures options ADV, -5.5%/+4.9% month-over-year respectively; and ADV for LME commodities was 0.643 million, -12.0%/+17.3% month-over-year respectively.

Third quarter results forecast: Based on the above high-frequency market trading data, we expect the main business revenue of the Hong Kong Stock Exchange in the 3Q2024 single quarter to be HK$4.197 billion, -0.4%/+9.4% month-on-month; the 3Q2024 MSCI Global Index will cumulatively increase 2.35% (VS. 3Q2023 down 3.81%), and the 3Q2024 Hang Seng Technology Index will cumulatively increase 33.69% (VS. 3Q2023 up 0.24%). At the same time, the company's margin investment income lags behind changes in overseas interest rates In terms of performance, we expect the return on investment (including margin) to be HK$1.367 billion, +16.0%/+12.9% month-on-year, respectively. The total revenue and investment income of the Hong Kong Stock Exchange is estimated to be HK$5.574 billion, +2.8%/+10.1% month-on-year, and net profit to mother is HK$3.326 billion, +5.4%/+13.4% month-on-year. In the first three quarters of 2024, we expect the total revenue and investment income of the Hong Kong Stock Exchange to be HK$16.195 billion, a year-on-year growth rate of +3.6%, and net profit to mother of HK$9.451 billion, or +2.2% year-on-year.

Fourth quarter performance flexibility estimate: The Hong Kong Stock Exchange's performance for the fourth quarter of this year is expected to show high elasticity. Since September 24, Hong Kong stock turnover has repeatedly reached new highs. On 9/24-10/14, the Hong Kong Stock Exchange ADT reached HK$362 billion. The daily turnover during this period reached HK$620.7 billion. From October to now (10/14), the Hong Kong Stock Exchange ADT reached HK$369.2 billion. Due to the persistence or differences of market activity on Hong Kong stocks, we made flexible calculations based on the assumption that HKEx ADT reached HK$400, 300, and HK$200 billion respectively in the fourth quarter: if the ADT in the fourth quarter reached HK$400, 300, and 200 billion, respectively, the full year of the Hong Kong Stock Exchange ADT would reach HK$185, 160, and HK$135 billion respectively. The estimated net profit for the full year of 2024 would reach 14.855, 14.158 and 13.462, respectively In HKD billion, the year-on-year growth rates reached 25%, 19%, and the net profit of 4Q2024 in a single quarter reached HK$5.404, 4.708, and HK$4.011 billion respectively. The month-on-month growth rates were 63%, 42% and 21%, respectively, and the year-on-year growth rates reached 106%, 80% and 53%, respectively.

Investment advice: The Hong Kong Stock Exchange is expected to experience a high quarterly performance in the fourth quarter of this year, and the current valuation has fallen back to a safe margin. We expect the Hong Kong Stock Exchange's net profit for 2024-2026 to be HK$13.462, 13.873, and HK$14.577 billion, respectively, +13.5%, +3.1% year over year. The current stock price corresponds to 30.4 x PE in 2024, which is within a safe margin and maintains a “buy” rating.

Risk warning: US interest rate cuts fell short of expectations; domestic economic recovery fell short of expectations; Hong Kong stocks were hit by the Black Swan incident.