[Event] The Hong Kong Stock Exchange announced its results for the first three quarters of 2024: revenue and other revenue for the first three quarters was $15.993 billion, +2% year over year, and net profit to mother was $9.27 billion, +0.1% year over year. The increase in results in the first three quarters was mainly due to the gradual improvement in the investment climate due to the announcement of economic stimulus measures in mainland China and the adoption of monetary easing policies by central banks around the world. Among them, Q3 achieved revenue and other income of HK$5.372 billion, +6% YoY and -1%, and net profit to mother of HK$3.145 billion, +7% YoY and -0.32%.

ROE (unannualized) for the first three quarters was 18.2%, -0.6pct year over year.

Trading was active in September, and Shanghai-Shenzhen-Hong Kong Stock Connect has repeatedly reached new highs. The spot segment achieved revenue of HK$6.351 billion in the first three quarters of 2024, or +1.9% year-on-year, accounting for 40% of revenue. The average daily trading volume in the spot market was +3% YoY to HK$113.3 billion. The average daily turnover of the Shanghai Shenzhen-Hong Kong Stock Connect northbound and southbound was HK$123.3 billion and HK$38.3 billion respectively, +14.0% and +19.3% respectively. The average daily transaction volume of Bond Connect Beixiang Connect was 44.1 billion yuan, +8.9% year-on-year. The Stock Exchange issued 45 IPOs, a year-on-year decrease of 2, with a total financing amount of HK$5.56 billion, +126% over the same period last year.

At the end of September, the volume reached many new single-day highs, and the number of transactions in the derivatives market continued to rise in the first half of the year.

The share capital securities and financial derivatives segment revenue for the first three quarters of 2024 was HK$4.517 billion, -10% year-on-year.

The number of derivatives contracts traded in the first three quarters reached a record high (single-day high on September 26 and 27), reaching 1.516 million, +12% over the same period last year. The average daily trading volume of securities and warrants on the Stock Exchange was -13% year-on-year, and the trading volume was -21% year-on-year. The average daily turnover of Futures Exchange derivatives contracts and Stock Exchange options contracts was +10.6% and 13.1% respectively. The number of newly listed warrants and bullbear certificates was -19.3% and -2.4%, respectively.

Commodity segment: Revenue of HK$2.099 billion in the first three quarters of 2024, +31.4% YoY. The average daily turnover of LME fee transactions for the first three quarters of 2024 was +25% year-on-year.

Data and Connectivity Division: Revenue for the first three quarters of 2024 was HK$1.56 billion, +1% year over year, mainly due to a 12% increase in equipment hosting service fees due to increased customer usage.

Company projects: The company's project revenue for the first three quarters of 2024 was HK$1.466 billion, +17.7% year-on-year. The company's internal investment income was HK$1.408 billion, +19.6% year-on-year, and the annualized net return on investment was 5.48%, +0.93pct year-on-year.

The reasonable value range was HK$353.20-368.20, maintaining the “better than the market” rating. We estimate that HKEx's total operating income on 24/25/26E was HK$22.9/24.9/26.8 billion, or +12%/+9%/+8%, respectively; net profit attributable to HKEx shareholders was HK$13.1/14.2/15.3 billion, respectively, or +10%/+9%/+8%. Using second-stage DDM to evaluate the Hong Kong Stock Exchange, a reasonable value range of HK$353.20-368.20 was obtained, corresponding to 2024E PE, which was 34.2-35.7 times, respectively. Maintain an “better than the market” rating.

Risk warning: Hong Kong's spot and derivatives trading volume has shrunk sharply; progress in connectivity has stalled; the effects of LME reforms have fallen short of expectations, and volume and price have plummeted.