JPMorgan issued a research report stating that despite robust trading volumes, the share price of Hong Kong Exchange (00388) has declined over the past few months in tandem with the weakness of the Hang Seng Index. JPMorgan believes that this divergence between share price performance and fundamental drivers (trading volume) creates conditions for a strong rebound in the stock price in the coming months. The firm maintains an 'Overweight' rating with a target price of HKD 530.
The Hong Kong Exchange reported third-quarter net profit of HKD 4.9 billion, up 56% year-on-year and 10% quarter-on-quarter, surpassing the firm's estimate by 3%. Performance across all business segments generally exceeded expectations, with revenue outpacing JPMorgan’s forecast by 1%, primarily driven by clearing and settlement income; expenses were 4% lower than expected due to decreased staff costs. Net investment income fell 34% quarter-on-quarter but was broadly in line with expectations. The operating profit margin reached 75%, improving by 203 basis points quarter-on-quarter, surpassing forecasts. During the quarter, the average daily turnover in the securities market increased by 20% quarter-on-quarter and surged 141% year-on-year, while the average daily turnover in derivatives also rose 7% quarter-on-quarter and 10% year-on-year. This strong earnings report is expected to drive upward revisions in market valuation.