JP Morgan released a research report noting that Hong Kong Exchanges and Clearing Limited (HKEX) reported a net profit of HK$4.3 billion for the fourth quarter of 2025. This represents a sequential decline of 12% but a year-on-year increase of 15%, surpassing JP Morgan's forecast by 19%. For the full 2025 fiscal year, profit reached HK$17.8 billion, a 36% increase compared to the previous year and 2% above market expectations. The firm anticipates strong share price performance, maintaining an "Overweight" rating on HKEX with a target price of HK$540.
The bank attributes the better-than-expected results primarily to revenue drivers. Trading and settlement fees performed better than anticipated, declining by 14% and 16% quarter-on-quarter respectively. This was achieved despite seasonally weak trading volumes, with the average daily turnover for cash equities falling 21% sequentially. These factors offset weaker-than-expected custody and market data fees.
Earnings were also boosted by a non-recurring gain of HK$163 million from the valuation of unlisted equity investments, alongside improved returns on HKEX's corporate funds. These were sufficient to counteract increased rebates provided to market participants. These elements contributed to strong net investment income of HK$1.2 billion, a 20% increase from the previous quarter, which helped drive the profit beat. Notably, even excluding the HK$163 million gain, pre-tax profit stood at HK$5.0 billion, still showing a 16% year-on-year increase and exceeding the bank's forecast by 15%. Cost control was in line with expectations, with total operating expenses rising 7% year-on-year.
For HKEX, this was a strong quarter, with robust earnings performance despite weak fourth-quarter volumes. The strong net investment income was a positive surprise and could be a source of upward revisions to earnings forecasts for the 2026 fiscal year. Following seasonal weakness in December 2025, trading volumes have regained strength. The average daily turnover from the start of the year to date has been approximately HK$260 billion, even accounting for the weaker period during the Lunar New Year holiday last week. Furthermore, HKEX entered 2026 with over 400 active IPO applications, a significant increase from the 297 applications in the third quarter.
Comments