By Kimberley Kao

Hong Kong Exchanges & Clearing's net profit and revenue jumped to new quarterly records as improved market sentiment boosted trading and listing activity in the Asian financial hub, boding well for the exchange operator's prospects in 2025.

The stock-exchange operator said Thursday that net profit reached a fourth-quarter high of 3.78 billion Hong Kong dollars, equivalent to US$486.2 million, climbing around 46% from a year earlier. Revenue and other income increased 31% to HK$6.38 billion--a new quarterly record--as trading and clearing fees rose across the cash, derivatives and commodities markets, the company said.

Both measures were slightly ahead of consensus estimates in a Visible Alpha poll, with analysts expecting net profit of HK$3.71 billion and revenue of HK$6.32 billion.

HKEX also witnessed stronger trading volumes during the quarter, with the headline average daily turnover doubling to HK$186.9 billion.

The robust results capped a year of improved fundraising and trading activity, marking the exchange operator's profit comeback after a weak showing in 2023. Hong Kong has been making efforts to get more companies to list in the city over the past year, including optimizing listing procedures, lowering transaction costs to bolster its securities market and adopting new measures aimed at greater capital market cooperation with mainland Chinese companies to boost dual listings.

"Looking to 2025, ongoing geopolitical and macroeconomic developments will likely continue impacting global markets," Chief Executive Bonnie Y Chan said.

"However, there are also encouraging signs of economic revitalization, with stimulative policies in mainland China and interest-rate cuts in other major markets providing renewed vibrancy to Hong Kong's fundraising and secondary markets," she said.

On Wednesday, Hong Kong Financial Secretary Paul Chan said funds raised from new listings in the city rose nearly 90% to HK$88 billion last year, ranking it fourth globally. More than 100 new IPO applications are being processed by HKEX, he said.

Increased investor interest has also spurred a revival in Hong Kong's and China's stock markets this year, fueled by a surge in sentiment toward Chinese tech shares after homegrown startup DeepSeek renewed confidence in China's AI technology.

"Since the beginning of this year, trading has been even more active, with average daily turnover exceeding HK$200 billion recently, up by more than 50% over last year's average. Total market capitalization reached HK$40 trillion," he said.

The Hang Seng Tech Index, which tracks the 30 largest technology companies listed in the city, this week hit its highest level since December 2021, gaining more than 30% this year. The benchmark Hang Seng Index has risen nearly 20% and is also at a multiyear high.

Shares of HKEX have climbed about 24% so far in 2025, closing at HK$365 on Thursday.

DBS Group Research said in a note that improving risk appetite will likely continue in the near term, "supported by recent rerating of tech stocks and a more supportive policy tone from the Chinese government toward the private economy."

Citi Research raised the target price on HKEX's stock to HK$410 from HK$370 after the results as it lifted its average daily turnover forecasts for 2025 and 2026 on the sentiment recovery. Trading activity so far this year remains well ahead of consensus estimates, analyst Michael Zhang said in a note. However, he identified three downside risks to the share price: easing trading volume, new-listing halts and rising geopolitical tensions.

In Wednesday's presentation of the Hong Kong budget for the next fiscal year, Financial Secretary Chan said HKEX will step up its promotion in Southeast Asia and the Middle East and seek areas of cooperation, including the listing of exchange-traded funds to "promote two-way capital flows."

In the middle-to-long term, the new listing reforms mentioned in the budget, such as improvements to the vetting process and optimizing listing thresholds, could help attract more initial public offerings to Hong Kong, analysts at DBS said. If the IPO applications translate into successful listings, "they could inject more liquidity and trading momentum into the market," they said.

Write to Kimberley Kao at kimberley.kao@wsj.com

(END) Dow Jones Newswires

February 27, 2025 06:46 ET (11:46 GMT)

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