In the first quarter of 2025, the emergence of DeepSeek has led to a revaluation of China's Assets, and the active performance of the Hong Kong market has also driven the stock price of the HKEX to steadily rise, coming close to last October's peak. However, as April arrived, Trump's tariff policies severely impacted the Global market, and the HKEX was not immune to this, erasing the gains made in the first quarter. At this crucial moment, the upcoming Q1 performance announcement from the HKEX has become a focal point for investors.

$HKEX (00388.HK)$It is expected to announce the Q1 performance on April 30, Beijing time, with Institutions anticipating the HKEX to achieve a revenue of 6.762 billion HKD in Q1, a year-on-year increase of 30.02%; the expected EPS is 3.49 HKD, a year-on-year increase of 49.12%.

Market trading is active! Southbound capital transactions have surged.

According to China International Capital Corporation Statistics, in the first quarter, the average daily trading volume (ADT) of Hong Kong stocks increased by 144% year-on-year and 30% month-on-month, reaching 242.7 billion HKD. Among them, the transaction volume of southbound capital increased by 255% year-on-year and 41% month-on-month, demonstrating the strong performance of southbound trading. Meanwhile, northbound trading also increased by 44% year-on-year, although it saw a slight decline month-on-month, the overall performance remains impressive. As an important bridge connecting mainland China with international markets, the increase in trading volume in the Hong Kong market will directly affect the revenue structure of the HKEX. UBS Group stated that for every 10% change in the average daily trading volume of Hong Kong stocks, it will cause the net income of the HKEX to change by 2.4% and 2.7% for 2025 and 2026, respectively, and will cause the revenue of the HKEX to change by 3.6% and 4.1% for 2025 and 2026, respectively.

In addition, for the derivatives market, the average daily trading volume (ADV) of equity index derivatives increased by 6% year-on-year, while the ADV of individual stock Options surged by 50%. This reflects the growing preference and participation of investors in derivatives trading, a trend that is becoming increasingly evident in the Hong Kong Stock market, bringing richer sources of revenue for the HKEX.

Of course, not all Indicators show a positive trend. China International Capital Corporation predicts that the investment income of the HKEX will decline by 15% year-on-year and 5% quarter-on-quarter, reaching 1.14 billion Hong Kong dollars. This is primarily due to poor performance in external markets and the base effect, reminding investors to be aware of external factors that may affect overall revenue expectations.

In the long term, China International Capital Corporation stated that the ongoing policy game is likely to further support market activity. In April 2025, the average daily turnover of Hong Kong stocks reached 344 billion Hong Kong dollars, with a single-day turnover exceeding 620.9 billion Hong Kong dollars on April 7, setting a new historical record. This phenomenon not only indicates the market's sensitivity to policy expectations but also demonstrates the confidence of funds returning to the Hong Kong market.

Chinese companies may return to list, with Hong Kong being the preferred listing location.

Recently, President Trump’s tariff policies have triggered turmoil in the global financial markets, and the potential risks of financial sanctions are also rising, especially for Chinese companies listed on the US stock market. Previously, US Treasury Secretary Mnuchin threatened that the possibility of delisting Chinese companies from US Exchanges was not ruled out.

In response, on April 13, Hong Kong's Financial Secretary Paul Chan Mo-po stated in his blog that Hong Kong has established a regulatory framework to facilitate the dual listing of companies that are already listed overseas.Dual ListingThe Hong Kong Securities and Futures Commission and the Hong Kong Stock Exchange are ready to ensure that if Chinese stocks listed overseas wish to return, Hong Kong must become their preferred listing location.

The following is a compilation of the Chinese concept stocks that have returned to be listed in Hong Kong and meet the requirements for returning to be listed in Hong Kong according to Futu News:

2020 and 2021 were peaks for secondary listings / dual listings, and it is expected that this time the Chinese concept stocks will flow back, with Hong Kong remaining the primary destination. According to Wind data, the turnover of Hong Kong stocks increased by 50% and 28% year-on-year in 2020 and 2021, respectively, and since 2018, the proportion of trading volume of Chinese-funded stocks has remained above 30%.

Soochow Securities stated that considering the convenience framework for listing in Hong Kong, if the Chinese concept stocks flow back, it is expected that Hong Kong will still be the preferred target. After screening, nearly 30 Chinese concept stocks that meet the return criteria total a market cap of nearly 200 billion dollars, and this portion is expected to bring about 5 billion Hong Kong dollars in daily trading volume. Additionally, if all ADR trading volumes flow back, it is expected to bring in an extra over 10 billion Hong Kong dollars in daily trading volume, accounting for about 10% of the trading volume in 2024. This return of Chinese concept stocks can increase the listing fees for the Hong Kong Stock Exchange and is expected to further enhance trading activity, allowing the Hong Kong Stock Exchange to benefit overall.

How do institutions view the Exchange?

China International Capital Corporation expressed an optimistic outlook on the investment prospects of HKEX, maintaining its Target Price at HKD 435 and giving a " outperform the Industry " rating.

According to China International Capital Corporation's forecast, the revenue of the Hong Kong Stock Exchange in the first quarter of 2025 will increase by 31% year-on-year and by 7% quarter-on-quarter, reaching 6.83 billion Hong Kong dollars. Among them, the fee-based business revenue, excluding investment income and other miscellaneous income, is expected to grow by 47% year-on-year and 10% quarter-on-quarter, reaching 5.65 billion Hong Kong dollars, which will drive a profit growth of 36% and a quarter-on-quarter increase of 7%, expected to reach 4.05 billion Hong Kong dollars.

UBS Group expects the net profit of the Hong Kong Stock Exchange in the first quarter to be 3.8 billion dollars, an increase of 27% year-on-year, estimating revenue to rise 28% year-on-year to 6.6 billion dollars, with a quarter-on-quarter growth of 4%, while net income remains basically flat.

UBS Group stated that the divergence in performance between revenue and net income is due to the fact that starting in 2025, Hong Kong businesses will need to pay taxes at a minimum rate of 15%, causing the group's effective tax rate to rise to 15.7% (the firm estimates an effective tax rate of 12.1% compared to the fourth quarter of 2024). The firm estimates that the net investment income of the Hong Kong Stock Exchange in the first quarter will be 1.16 billion Hong Kong dollars, decreasing by 14% and 3% year-on-year and quarter-on-quarter respectively, with a reduction in margin requirements leading to a decrease in the size of the margin fund.

Citi is slightly pessimistic, lowering the target price for HKEX to 385 Hong Kong dollars, and reducing the earnings forecast for the fiscal years 2026 and 2027.

Citi pointed out that the expected profit for HKEX in the first quarter of fiscal year 2025 is 3.9 billion Hong Kong dollars, with a quarterly and yearly growth of 3% and 31% respectively; total revenue is expected to reach 6.7 billion Hong Kong dollars, with a quarterly and yearly growth of 5% and 29% respectively. The bank stated that due to the reduction in outstanding contracts and margin requirements in Hong Kong, investment income may decline quarter-on-quarter.

Still staying up late to look at reports?Futubull AI is officially launched!Come and use the AI features to interpret the Earnings Reports.

Editor/lambor