More re-rating to come for HKEX with ‘sustained surge in jumbo IPOs’, upcoming 1HFY2025 results: CGSI

Hong Kong Exchanges and Clearing (HKEX) is expected to release its financial results for 2HFY2025 in the coming week. “We think HKEX will highlight escalating jumbo IPO volumes and its structural average daily turnover (ADT) increase in public disclosures, which could serve as a re-rating catalyst,” write Li and Chang.

The CGSI analysts are staying “add” on HKEX with an unchanged target price of HK$520 for now. CGSI initiated coverage on HKEX in March and raised their fair value estimate to HK$520 in June, expecting “strong” average daily turnover growth to drive some 9% to 25% net profit growth over FY2025 to FY2027.

World #1 in IPO proceeds this year

Even apart from jumbo IPOs, total IPO proceeds and the number of IPO applications continue to surge, they add. HKEX’s Main Board filings reached 207 by end-july, up 18% m-o-m and 130% y-o-y.

See also: Despite IPO boom, HKEX hype could ‘moderate’ with trade tensions set to impact 1HFY2025 results: Morningstar

By August, Hong Kong IPO fundraising totalled HK$128 billion, or 80% of CGSI’s initial FY2025 forecast of HK$160 billion from March.

“At this pace, we estimate HKEX FY2025 IPO fundraising could reach HK$220 billion. We see HKEX leading the global IPO market (including Nasdaq/NYSE) in FY2025,” write the CGSI analysts.

See also: Hong Kong’s new listing rules seen as helping hot market to stay hot

Re-rerating catalyst

Southbound flows remain the key driver of ADT, reflecting incremental demand, note Li and Chang.

From January to August, southbound net inflows hit a record HK$901 billion, reaching 75% of CGSI’s FY2025 forecast of HK$1,200 billion.

From July 1 to Aug 13, southbound trading accounted for 27.5% of total ADT traded in HKEX.

Market confidence continues to strengthen, note the analysts, with Bloomberg consensus FY2025 ADT revised up 15% to HK$208 billion since June.
“We view sustained estimate upgrades or HKEX ADT outperformance as a potential re-rating catalyst,” they add.

As at 11.59am, shares in HKEX are trading HK$1.20 higher, or 0.275 up, at HK$441. HKEX shares — listed on SEHK — have risen 54% year to date.

See also: When Hong Kong investors start to take notice of Singapore

Table: CGSI

Read more about HKEX and SGX:

Hong Kong’s new listing rules seen as helping hot market to stay hot (August)

When Hong Kong investors start to take notice of Singapore: Interview with SGX's equities head Ng Yao Loong (July)

Despite IPO boom, HKEX hype could ‘moderate’ with trade tensions set to impact 1HFY2025 results: Morningstar (July)

CGSI sees ‘more share price upside’ for HKEX, raising target price by 18% (June)

‘Homecoming’ for US-listed China ADRs, HK$160 bil from ‘jumbo’ IPOs to keep HKEX valuation ‘elevated’: CGSI (May)

HKEX posts record quarterly profit on trading and listings boom (April)

HKEX saw 71 IPOs in 2024 raising HK$88 bil, ranking fourth globally (February)