[ET Net News Agency, 10 May 2018] Citi Research said HKEx's (00388) 1Q net profit of
HK$2,562mn was in line with its estimates. The strong results were driven by notable
increases in both stock and derivatives turnover as well as other revenue lines, while
operating expense rose at a much slower speed of 11% yoy.
As market pulls back amid China-US trade tensions and China's deleveraging, ADT (average
daily turnover) has moderated from HK$146bn in 1Q to HK$106bn in 2Q-to-date.
Heightened market volatility has resulted in greater hedging/shorting activities and
hence increased derivatives turnover. Citi expects derivatives turnover to stay more
resilient than stock turnover.
Citi reiterated its view that the recent listing rule changes are a structural uplift to
HKEx's listing hub status. While Chinese internet giants currently listed in the US would
"prefer" CDR over a secondary listing on HKEx, it believes HKEx offers unique appeals to
Chinese unicorns that aim to tap international capital and expand businesses globally
while being close to home market.
Citi trimmed its earnings estimates by 8%-9% to reflect lower ADT forecasts (HK$137bn in
2018 and HK$150bn in 2019), but partially offset by higher derivatives turnover and
listing revenue. It maintained its "buy" call on HKEx, with an unchanged target price of
HK$420. (KL)