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Hong Kong Exchange stock price target cut, keeps Buy rating

EditorNatashya Angelica
Published 04/24/2024, 01:33 PM

On Wednesday, HSBC revised its stock price target for Hong Kong Exchange (388:HK) (OTC: HKXCY), reducing it to HK$270 from the previous HK$352. The firm has decided to maintain its Buy rating on the stock despite the adjustment. The action follows a reassessment of long-term Average Daily Turnover (ADT) growth and earnings projections.

The financial institution has modified its long-term ADT growth forecast to 6%, a downturn from the earlier 10% expectation. This new projection aligns more closely with current market conditions, which include a lower market valuation and net investment income. The revised ADT growth estimate is still higher than the 3% that the market seems to be anticipating.

The stock price target adjustment also comes with a reduction in earnings per share (EPS) forecasts for the upcoming years. HSBC has decreased its EPS estimates by 10% for 2024 and by 11% for 2025. This recalibration reflects the impact of the lower market valuation and ADT on the company's financial outlook.

HSBC's commentary on the update highlighted the discrepancies between its projections and market performance. Over the last two years, the ADT has experienced an approximate 10% decline, which contrasts with HSBC's more optimistic long-term growth forecast.

Despite the downward revisions, HSBC's stance remains positive, as evidenced by the retention of the Buy rating for Hong Kong Exchange's shares.

Investors and stakeholders of Hong Kong Exchange can refer to the detailed analysis on page 5 of HSBC's report, which outlines the rationale behind the new ADT growth forecast and the implications for the stock's future performance.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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