Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Hong Kong Exchanges and Clearing Ltd (HKXCF) delivered record financial results in 2024, with revenue and other income up 9% from the previous year. Profit attributable to shareholders increased by 10% year-on-year, with a remarkable 46% increase in the fourth quarter. The diversification strategy is paying off, with double-digit growth in cash, commodities, and ETP markets, and record average daily volumes in the derivatives market. The Connect program saw record highs in northbound and southbound trading volumes, reflecting strong investor interest. HKXCF continues to attract innovative companies, with new economy companies accounting for over 80% of capital raised in IPOs in 2024.

Negative Points

Investment income from margin funds decreased, partly offsetting revenue gains. Operating expenses increased by 6%, driven by higher staff and IT costs. Net investment income of margin funds fell by 13%, due to increased rebates and lower returns from Japanese yen collateral. The company faces ongoing macroeconomic uncertainties and geopolitical developments that could impact market sentiment. The introduction of new tax rules under BEPS 2.0 could have a meaningful impact on financials, with a minimum 15% tax rate likely to be applied retrospectively.

Q & A Highlights

Warning! GuruFocus has detected 9 Warning Signs with HKXCF.

Q: Can you provide more details on the IPO pipeline, particularly regarding the secondary listing of Asian companies, and any potential impacts from regulatory scrutiny on IPO proceeds? A: (Bonnie Yi Chen, CEO) The trend of Asian companies pursuing dual listings in Hong Kong began last year, with successful IPOs like Medea. Many companies are motivated by their international ambitions, despite potential share price discounts. Currently, about 30 companies have filed or announced plans for H-share listings. Regarding regulatory scrutiny, while there are capital controls in China, the country encourages a "plus one" strategy for offshore investments, which should support ongoing IPO momentum.

Q: Could you elaborate on the potential changes to listing requirements and post-listing obligations mentioned in the recent government budget speech? A: (Bonnie Yi Chen, CEO) We continuously review our listing regime to ensure it remains competitive and fit for purpose. Since 2018, we've introduced user-friendly frameworks for new economy companies and improved vetting processes. We aim to stay competitive as other global exchanges also review their frameworks. (Catherine N, Head of Listing) We are working closely with the SSC on more initiatives and expect further consultations this year.

Story Continues

Q: What are the strategic plans for 2025, particularly regarding market vibrancy and operational resilience? A: (Bonnie Yi Chen, CEO) In 2025, we aim to enhance market vibrancy and resilience by implementing minimum spread reductions and exploring a T+1 settlement cycle. We are also consulting on optimizing the IPO price discovery mechanism. Additionally, we are developing the Orion derivative platform and exploring adjacent business opportunities, such as data marketplaces and fund repositories.

Q: How do you plan to manage operating expenses, especially in light of the pay freeze for Hong Kong public servants? A: (Vanessa Lau, COO and CFO) We maintain tight cost discipline, with OpEx generally well-controlled in high single digits. We continue to invest in talent and IT systems, which are crucial for our business. Despite some legal fee recoveries from the LME nickel incident, we expect to maintain attractive EEA margins.

Q: Can you discuss the potential growth of data-related business and its impact on revenue diversification? A: (Bonnie Yi Chen, CEO) We recognize the potential of data as a revenue stream and have launched the HKEX Data Marketplace to democratize access to our data. This initiative aims to support sophisticated trading strategies and research. While our core business remains strong, we are exploring adjacent opportunities, including data and index businesses, to diversify our revenue streams.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

View Comments