On Monday, BofA Securities analyst Michael Li reiterated a Buy rating and a price target of HK$349.00 for Hong Kong Exchanges (388:HK) (OTC: HKXCY). Li's outlook is based on the anticipation of increased Initial Public Offering (IPO) activity on the Hong Kong stock exchange, particularly from Mainland China companies. This projection follows the announcement by China's largest electric vehicle battery producer that it plans to list on the Hong Kong exchange.
Li expects the IPO fundraising size at Hong Kong Exchanges to climb from US$11 billion in 2024 to US$15 billion in 2025. This growth is seen as a result of a higher number of IPOs from Mainland China. Despite the fact that direct revenue from new listings accounts for less than 2% of HKEX's total income, the presence of large cap IPOs is believed to potentially attract significant fund inflow and contribute to improved liquidity for the exchange.
The analyst pointed out that while overseas investors currently have the opportunity to purchase shares of CATL and other A-share listed large companies through the Stock Connect, there are advantages to holding Hong Kong Dollar-denominated shares. These benefits include reduced currency concerns and lower foreign exchange costs.
Li's continued endorsement of a Buy rating on Hong Kong Exchanges stock is based on the expectation that the influx of new IPOs will bolster the exchange's revenue and earnings, supporting its financial growth.
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