Has Hong Kong Exchanges and Clearing’s 42% Rally in 2025 Left Limited Upside?
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Has Hong Kong Exchanges and Clearing’s 42% Rally in 2025 Left Limited Upside?
010 mins
Wondering if Hong Kong Exchanges and Clearing is still worth buying after its big run, or if the easy money has already been made? You are not alone.
The stock is up an impressive 41.8% year to date and 41.3% over the past year, even though the last 30 days saw a modest pullback of 2.5% after a recent close at HK$407.
Investors have been reacting to a mix of structural reforms in Hong Kong’s capital markets and renewed interest from international funds as China related sentiment has slowly thawed. At the same time, ongoing debates about Hong Kong’s long term role as a global financial hub have kept volatility elevated and added nuance to the latest leg of the rally.
Despite all that excitement, Hong Kong Exchanges and Clearing scores just 1/6 on our valuation checks, which raises some fair questions about how much upside is left. Next we will walk through different valuation approaches to see what the current price is really baking in, before finishing with a more holistic way to think about value that many investors overlook.
Hong Kong Exchanges and Clearing scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
The Excess Returns model looks at how much profit a company can generate above its cost of equity and then capitalizes those surplus returns into an intrinsic value per share.
For Hong Kong Exchanges and Clearing, the analysis starts with a Book Value of HK$42.86 per share and a Stable EPS of HK$14.41 per share, based on weighted future return on equity estimates from 18 analysts. This implies an Average Return on Equity of 31.19%, which is well above the estimated Cost of Equity of HK$3.75 per share.
The gap between what investors require and what the company is expected to earn, the Excess Return, is HK$10.65 per share. Using a Stable Book Value of HK$46.20 per share, sourced from 14 analysts, the model translates these excess returns into an intrinsic value of about HK$247 per share.
Compared with the recent market price around HK$407, this implies the stock is roughly 64.8% overvalued on an excess returns basis.
For profitable and relatively mature businesses like Hong Kong Exchanges and Clearing, the price to earnings ratio is a useful shorthand for how much investors are willing to pay for each dollar of current earnings. It naturally links price to profitability, which is what ultimately supports long term returns.
What counts as a fair PE depends on how fast earnings are expected to grow and how risky those earnings are. Higher growth and lower risk typically justify a higher multiple, while slower growth or elevated uncertainty usually pull it down. Hong Kong Exchanges and Clearing currently trades at about 29.9x earnings, which is well above the Capital Markets industry average of 20.7x and the peer group average of around 12.2x.
Simply Wall St uses a proprietary Fair Ratio to estimate what a more appropriate PE should be for this specific business, given its growth outlook, profitability, industry, size and risk profile. For Hong Kong Exchanges and Clearing, that Fair Ratio is 12.0x, implying the stock is priced materially richer than what those fundamentals would normally support, even after allowing for its quality and market position.
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple framework on Simply Wall St where you attach your story about a company to the numbers as a set of assumptions for future revenue, earnings, margins and a fair value estimate.
A Narrative connects three things in a straight line: what you believe about the business, how that belief shows up in a financial forecast, and the fair value that drops out of those assumptions, so you can immediately see whether the current share price looks high, low, or about right.
Within the Community page on Simply Wall St, millions of investors publish and refine Narratives that update dynamically as new information like earnings results or major news hits. This helps you decide when to buy, hold, or sell by constantly comparing each Narrative’s Fair Value to the live market Price.
For Hong Kong Exchanges and Clearing, for example, one Narrative might argue that cross border cooperation and product expansion justify a fair value near HK$505. A more cautious view that emphasizes competitive and regulatory risks might see fair value closer to HK$340. Narratives allow both perspectives to coexist so you can choose the one that best matches your own expectations.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include 0388.HK.
