UBS has adjusted its target price for Hong Kong Exchanges and Clearing (HKEX) from HK$471 to HK$462, based on a forward 12-month price-to-earnings ratio of 35 times, while maintaining a "Neutral" rating. HKEX's fourth-quarter performance exceeded expectations, with revenue rising 15% year-on-year to HK$7.3 billion, approximately 9% above market consensus. This was supported by stronger net investment income and higher depository and custody fees. Net investment income increased 2% year-on-year and 20% quarter-on-quarter to HK$1.2 billion, driven by improved equity securities returns and foreign exchange gains. Depository and custody fees surged 53% year-on-year to HK$394 million, benefiting from active e-IPO activities, higher share registration fees, and growth in Stock Connect turnover. Net profit grew 15% year-on-year to HK$4.3 billion, about 15% above market consensus, aided by effective cost control. Excluding a one-time FCA fine expected in 2025 and legal fee recoveries in 2024, operating expenses are projected to rise only 2% year-on-year in fiscal 2025. Looking ahead, HKEX aims to balance cost discipline with strategic growth investments. The first quarter of 2026 is expected to face a higher comparative base. Incorporating year-to-date market activity and UBS's updated outlook on the federal funds rate, the firm has revised its earnings per share forecasts for 2026, 2027, and 2028, raising the 2026 estimate by 3% to HK$13.3, lowering the 2027 estimate by 2% to HK$12.9, and reducing the 2028 estimate by 3% to HK$13.8.