The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Hudson Lockett

HONG KONG, Feb 26 (Reuters Breakingviews) - In cards you play the cards you’re dealt, and Hong Kong Exchanges and Clearing 0388.HK looks at last to have a decent hand. Chief Executive Bonnie Chan caps her first year with the delivery of annual results on Thursday. Thanks to a rally in Chinese tech stocks, she can look forward to some ample tailwinds ahead.

A median forecast from Visible Alpha tips annual earnings at the $56 billion bourse to rise 10% to HK$13 billion ($1.7 billion). That's largely thanks to a forecasted surge of nearly 20% in trading, clearance and other fees at its equities business, which accounted for nearly half of the exchange operator's EBITDA in 2023.

Much of the credit for rising turnover goes to external circumstances: pledges of forceful economic stimulus from Beijing in September boosted Hong Kong stocks’ combined market cap by about $450 billion by the end of January and prompted global investors to reconsider their aversion to Chinese equities. Technology, in particular, is in vogue again: The release of Hangzhou-based Deepseek’s low-cost AI training model last month and President Xi Jinping's supportive messaging to private sector entrepreneurs have further whetted appetites, sending the Hang Seng Tech index .HSTECH up 27% year to date.

Chinese officials, under pressure to boost growth and bolster confidence in the private sector, have good reason to want more share offerings in Hong Kong. To that end, Chan has worked to clear the runway for initial public offerings. In October, HKEX streamlined listings to subject applicants to only two rounds of questioning—or just one, for qualified companies already trading on the mainland. That will help to bolster the ranks of firms like Shenzhen-listed Contemporary Amperex Technology 300750.SZ, the world’s largest battery maker, which recently filed to raise up to $5 billion from a Hong Kong share sale this year, per Reuters.

And as part of broader reforms to improve liquidity, HKEX will soon adopt a new fee regime that removes minimum settlement fees, among other things. That should encourage lower-value transactions, and no doubt please the small-bore mainland traders who have been pouring money into Hong Kong stocks this year.

Still, it is not difficult to imagine spoilers to these favorable trends. Despite the mainland securities watchdog's pledge last year to funnel more listings to Hong Kong, China's foreign exchange regulator may be scrutinising offshore listings to crack down on capital outflows, Bloomberg reported this week, citing sources. The fate of HKEX also remains substantially tied to the mast of Chinese tech. But for now, at least, that is mostly a good thing.

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CONTEXT NEWS

Hong Kong Exchanges and Clearing is set to report annual earnings on February 27.

Earnings are forecast to rise 10% to HK$13 billion, according to the median analyst forecast gathered by Visible Alpha.

Shares in HKEX have risen 18% since the start of the year.

(Editing by Robyn Mak and Aditya Srivastav)

((For previous columns by the author, Reuters customers can click on LOCKETT/ hudson.lockett@thomsonreuters.com))