lowers Hong Kong Stock Exchange price target, maintains buy rating

On Wednesday, HSBC revised its price target for Hong Kong Exchanges and Clearing Limited (388:HK) (OTC: HKXCY) to HK$270 from the previous target of HK$352. Despite the correction, the company decided to maintain a Buy rating on the stock. The move follows a reassessment of long-term average daily revenue (ADT) growth and profit forecasts.

The financial institution has revised its long-term ADT growth forecast to 6%, down from its previous forecast of 10%. This new forecast is more consistent with current market conditions, including lower market valuations and net investment income. The revised ADT growth forecast is still higher than market expectations of 3%.

The price target adjustment also comes with lower earnings per share (EPS) forecasts for the next few years. HSBC has lowered its 2024 earnings per share forecast by 10% and its 2025 earnings per share forecast by 11%.

HSBC's comments on the update highlighted the discrepancy between its forecasts and market performance. ADT has experienced a decline of about 10% over the past two years, which contrasts with HSBC's more optimistic long-term growth forecasts.

Despite the downgrade, HSBC's stance remains positive, as evidenced by maintaining a buy rating on the Hong Kong exchange stock.

Investors and HKEx shareholders can refer to the detailed analysis on page 5 of the HSBC report, which outlines the rationale behind the new ADT growth forecast and the impact on the stock's future performance.

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