GF SEC has issued a research report maintaining its Overweight rating on HKEX (00388), assigning a reasonable valuation of 30x PE for 2026, corresponding to a fair value of HK$489.09 per share.

The brokerage forecasts the company's net profit attributable to shareholders to grow by 16.4% and 16.1% year-on-year in 2026 and 2027 respectively, with earnings per share (EPS) of HK$16.30 and HK$18.93.

HKEX's revenue and profit for the first three quarters of 2026 both reached historic highs for the same period, with revenue and other income of HK$24.569 billion, up 12% year-on-year, and profit attributable to shareholders of HK$15.427 billion, up 15% year-on-year.

The brokerage believes that Shanghai-Shenzhen Stock Connect and LME business effectively offset the decline in cash market trading, while listing fees and refinancing business provided core support. The main views of GF SEC are as follows:

Third quarter single-quarter performance slightly declined, first three quarters revenue and profit both hit historic highs

HKEX disclosed its third quarter 2026 results, with single-quarter revenue and other income of HK$7.867 billion, up 1% year-on-year and down 7% quarter-on-quarter; profit attributable to shareholders of HK$4.859 billion, down 1% year-on-year and down 10% quarter-on-quarter.

The quarter-on-quarter decline was mainly due to cash market trading contracting 12% from the historic high in the second quarter of 2026, as well as HK$290 million in non-recurring investment income recognized in the second quarter.

For the first three quarters of 2026, the company's revenue and other income reached HK$24.569 billion, up 12% year-on-year; profit attributable to shareholders was HK$15.427 billion, up 15% year-on-year; EBITDA margin was 80%, up 1 percentage point year-on-year.

Cash market decline offset by Shanghai-Shenzhen Stock Connect and LME

In the third quarter of 2026, Hong Kong cash market average daily turnover (ADT) was HK$238.4 billion, down 11% year-on-year; Stock Connect ADT was HK$107.3 billion, down 30% year-on-year, dragging down trading and clearing fee income.

During the same period, combined Shanghai-Shenzhen Stock Connect ADT was RMB309.7 billion, up 15% year-on-year; London Metal Exchange (LME) average daily volume was 742,000 lots, up 12% year-on-year, with commodities revenue achieving rapid growth, and the two businesses effectively offsetting the decline in cash market trading.

For the first three quarters of 2026, Shanghai-Shenzhen Stock Connect ADT was RMB332.4 billion, up 61% year-on-year; LME average daily volume was 809,000 lots, up 16% year-on-year, with cumulative growth even more significant.

Listing fees and refinancing as core support

According to the company's quarterly report, in the first three quarters of 2026, a total of 118 companies newly listed, raising HK$388.4 billion, doubling year-on-year and ranking second globally; third quarter single-quarter fundraising was HK$176 billion, up 123% year-on-year.

Projects included Zhongxuchuang's HK$61.4 billion IPO and Alibaba's HK$80 billion placement. Driven by this, listing fee income grew 35% year-on-year to HK$901 million; post-listing refinancing scale was HK$572.8 billion, up 25% year-on-year; equity-linked product fundraising was HK$199.7 billion, up 34% year-on-year, all reaching historic highs for the same period.

Investment income breakdown

Regarding margin deposit investment income, HK$2.104 billion was achieved in the first three quarters of 2026, down 19% year-on-year, mainly due to increased rebates to clearing participants.

Regarding corporate funds investment income, HK$1.436 billion was achieved in the first three quarters of 2026, up 11% year-on-year. Among this, fair value appreciation of unlisted equity investments was HK$307 million, which is non-recurring income; due to redemption of external fund scale, external portfolio contributed HK$17 million, compared to HK$237 million in the same period last year. Internally managed funds investment income was HK$1.112 billion, up 5% year-on-year, with annualized net investment return of 5.04%, up 37 basis points year-on-year.

Diversified ecosystem accelerating

In the third quarter of 2026, HKEX made intensive strategic progress, including launching the first offshore Chinese government bond futures, advancing the paperless market to land in November, adding Bursa Malaysia as a recognized exchange, publishing the S&P 500 HKEX Tech 100 Index, and LME restarting US dollar gold futures.

Risk warnings include macroeconomic downturn; geopolitical instability; and intensifying competition among international exchanges.