Hong Kong Exchanges (00388) Report Interpretation

Overview

Goldman Sachs assesses Hong Kong’s first five-year plan and the 2026 Policy Address as supportive of Hong Kong Exchanges’ strategy to build a broader multi-asset ecosystem. It maintains a Buy rating and identifies fixed income and currencies as the next major growth avenue.

Core views

Hong Kong Chief Executive John Lee’s 16 September 2026 Policy Address and Hong Kong’s first five-year plan set out a roadmap to reinforce the city’s role as an international financial centre. The priorities include offshore RMB business, stronger equity and bond markets, a commodity-trading ecosystem, finance-and-technology innovation, and financial-risk prevention. Goldman Sachs believes this roadmap supports HKEX’s multi-asset strategy because improved links between mainland enterprises and international capital could expand Hong Kong-market product offerings and liquidity. In cash equities, proposed listing reforms include streamlined prospectus disclosures, promotion of dual-primary and secondary listings from Southeast Asia and Belt & Road markets, and easier rules for transactions, spin-offs and restructurings. HKEX is expected to consult in 1H27 on changes for specialist technology companies, including market-capitalisation thresholds. The report also highlights preparations for a possible T+1 settlement cycle, potential inclusion of RMB counters in Southbound Stock Connect, and HKEX encouragement for listed companies to establish RMB counters. ETF development could be supported by expanded mutual-market access and eligible-product coverage, ETF cross-listings, and higher MPF investment limits for eligible ETFs. Goldman Sachs sees FIC as the next leg of HKEX’s growth engine, tied to RMB internationalisation. Following expansion of the RMB business liquidity facility to Rmb500bn, the HKMA plans a seven-day offshore RMB liquidity tendering mechanism, possible enhancements to the PBOC currency-swap arrangement, and offshore RMB short-term debt instruments. The SFC is to support additional HKEX RMB FX futures after the CGB futures launch. The government also plans broader Dim Sum bond issuance, more tenor diversity, and greater volume and frequency of Ministry of Finance sovereign-bond issuance in Hong Kong; HKEX is expected to launch an Offshore RMB Bond Index that could support future ETFs. Connectivity and post-trade reforms are intended to improve bond-market liquidity and capital efficiency. Authorities will explore adding HKD and RMB bond-related products to Southbound Bond Connect. HKEX plans to accept onshore bonds held through Northbound Bond Connect in collateral arrangements and to incorporate Southbound Bond Connect bonds into repo arrangements. Pipeline infrastructure includes an electronic fixed-income and FX trading platform, possible centrally cleared bond repos, phased CMU global securities services, and potential interconnection between CMU OmniClear and the Depository and Nominee System to pursue unified management of bond and equity assets. The roadmap also broadens the addressable derivatives and commodities ecosystem. HKEX is to add short-dated stock options, thematic futures and options, and support bond and commodity indices with related ETFs and derivatives. Cross-CCP margin offsets, wider eligible-collateral pools and lower collateral-funding costs are intended to improve liquidity and capital efficiency. A central gold clearing and settlement system is expected in 1Q27, alongside RMB-denominated physically settled gold futures. Hong Kong is also expanding its physical metals footprint through LME-approved warehouses in the Northern Metropolis and plans a half-rate tax concession for physical commodity trading. Goldman Sachs maintains Buy on HKEX with a 12-month HK$532 target price, based on a three-stage dividend discount model and implying 34x 2027E P/E. Its forecasts show revenue rising from HK$29,161.0mn in 2025 to HK$32,299.0mn in 2026E, HK$32,981.4mn in 2027E and HK$35,054.9mn in 2028E; EPS is forecast at HK$15.75, HK$15.87 and HK$16.87 respectively. The report identifies competition from onshore capital markets, weaker cash-market velocity, China onshore fee reductions, and sustained China deflation as downside risks.

Analysis framework

The report evaluates how individual policy initiatives could affect HKEX’s product breadth, market connectivity, liquidity and capital efficiency across equities, FIC, derivatives and commodities. It then supports its valuation with a three-stage dividend discount model and presents revenue, EPS and valuation forecasts.

Methodology notes

• Valuation methodsDDM (Dividend Discount Model)

  Three-stage DDM

  Goldman Sachs derives its 12-month HK$532 target price from a three-stage dividend discount model, which values the company using dividends across different growth stages.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Hong Kong Exchanges (00388.HK)

  Primary covered company expected to benefit from policy support for a multi-asset financial-market ecosystem.

  Strengths

  Potentially broader product offerings and market liquidity across equities, FIC, derivatives and commodities; FIC expansion is identified as the next growth engine.

  Risks

  Higher competition from onshore capital markets, lower cash-market velocity, fee pressure from reduced onshore China fees, and sustained China deflation.

Key data

• 12-month target priceHK$532.00Based on a three-stage DDM; implies 34x 2027E P/E.
• Share priceHK$395.60As of the 16 September 2026 close.
• Implied upside34.5%Versus the reported current price.
• 2026E revenueHK$32,299.0mnCompared with HK$29,161.0mn in 2025.
• 2027E EPSHK$15.87Goldman Sachs forecast.
• 2028E revenue and EPSHK$35,054.9mn and HK$16.87Goldman Sachs forecasts.
• Offshore RMB liquidity facilityRmb500bnThe report cites its expansion as part of measures to improve offshore RMB liquidity.
• Gold clearing and settlement launch1Q27Expected launch timing for the central clearing and settlement system for gold.

Impact & implications

The report argues that the policy roadmap can broaden HKEX’s addressable markets by strengthening listings, cross-border connectivity, RMB-market liquidity, bond-market infrastructure and product development. It particularly identifies FIC expansion as the next growth engine, while derivatives and commodity initiatives extend the multi-asset strategy.

Risks

• Higher competition with onshore capital markets for business.
• Lower velocity in the cash market.
• Fee pressure from reduced fees onshore in China.
• A sustained deflationary environment in China.

What to watch

• HKEX’s 1H27 consultation on amendments for specialist technology companies, including market-capitalisation thresholds.
• Progress toward T+1 settlement, RMB-counter inclusion in Southbound Stock Connect and broader ETF connectivity.
• Implementation of offshore RMB liquidity measures, including the seven-day tendering mechanism and RMB bond-market initiatives.
• Launch of the Offshore RMB Bond Index and developments in Bond Connect collateral and repo arrangements.
• Expected 1Q27 launch of the central gold clearing and settlement system and introduction of RMB-denominated physically settled gold futures.