Hong Kong Exchanges and Clearing Should See Long-Term Growth as the Conduit to China Markets
HKEX currently enjoys an extraordinarily privileged position, in that it holds an effective monopoly on facilitating the movement of capital between the world’s second-largest economy and the rest of the world, and its revenue is mainly driven by its trading volumes and the number of IPO listings. However, China has steadily increased its influence over Hong Kong in recent years, and Hong Kong has seen an outflow of both human and financial capital. Despite the volatility, both trading volume and listings have grown 89% and 68% in 2025 after the postpandemic recovery, and we think the trend is likely to continue as international investors become more interested in China. In addition, its Stock Connect program should generate incremental trading fees that should fall mostly to the bottom line given the business is capital-light. Stock Connect should not require additional infrastructure other than collateral holding mechanisms, for which the exchange already has the facilities. Postpandemic, revenue has increased, correlating with trading volume due to the incremental fees, and we do not expect disruptions as long as international investors remain drawn to Mainland Chinese companies.
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