UBS Boosts HKEX Target Price 9% on 35% Profit Surge

UBS has revised its outlook for the Hong Kong Exchanges and Clearing Limited (HKEX), raising its target price to HK$430 from HK$393. This adjustment comes on the heels of a robust performance forecast for the second quarter, with net profit after tax (NPAT) and revenue expected to surge by 35% and 30% respectively. The primary driver behind this optimistic outlook is the strong net investment income (NII), which is projected to exceed market expectations by 11% for NPAT and 7% for revenue.

The bank's report highlights that the second quarter's average daily turnover (ADT) has surged by 95% year-on-year, reaching HK$238 billion. This figure is close to the peak levels seen in the first quarter. Additionally, the proportion of southbound funds has increased to 24%, indicating a significant inflow of capital. Looking ahead to the second half of the year, UBS anticipates that the ADT will moderate to HK$197 billion. The new stock market remains vibrant, with approximately 200 companies, primarily from the technology, healthcare, and consumer sectors, awaiting listing.

UBS has also upgraded its ADT forecasts for the years 2025 to 2027, increasing them by 14%, 9%, and 8% respectively. These revised projections stand at HK$218 billion, HK$185 billion, and HK$208 billion for the respective years. The bank maintains a "neutral" rating for HKEX, reflecting a balanced view of the company's prospects amidst a dynamic market environment.