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TMTPOST -- Hong Kong』s stock market has delivered a standout performance in 2025, outperforming global peers and attracting investor attention from both domestic and international markets.
The strong showing is largely due to investors avoiding the highly valued U.S. stock market amid trade uncertainties, directing capital toward emerging markets, and tapping into opportunities presented by Hong Kong-listed tech stocks, especially those tied to artificial intelligence. Low domestic deposit rates and increased northbound flows via Stock Connect have further bolstered market liquidity.
Since the start of the year, Hong Kong』s main stock indices have surged more than 24%, far ahead of U.S. equities. Trading activity has also skyrocketed. In the first half of 2025, average daily turnover in Hong Kong』s securities market reached HK$240.2 billion, a 1.18-fold increase from the prior year. Futures and options trading also expanded, with more than 1.7 million contracts traded daily on average, up 11% year-on-year. ETFs performed even more impressively, with average daily turnover hitting HK$33.8 billion, nearly doubling compared to 2024.
The buoyant secondary market has fueled activity in Hong Kong』s primary market. The Hong Kong Exchanges and Clearing Limited (HKEX, 00388.HK) benefited from improved listing rules, with 44 IPOs raising HK$109.4 billion in the first half—over seven times the amount raised in the same period last year. Post-listing fundraising totaled HK$175.1 billion, up 2.3 times year-on-year. This resurgence underscores Hong Kong』s continued appeal as a listing venue for both domestic and international firms.
HKEX reported record-breaking results in the first half of 2025, with total revenue and other income up 32.53% to HK$14.076 billion. Core business revenue rose 33.68% to HK$12.954 billion, fueled by record trading volumes in equities and stock options, higher custody fees, and increased net investment income from larger margin balances. Investment income from corporate funds also climbed 15.87% to HK$1.044 billion.
Operating efficiency contributed to robust profits. EBITDA for the period reached HK$10.939 billion, up 42.79% year-on-year, with the EBITDA margin rising six percentage points to 79%. Spot trading was the primary driver of revenue growth, with average daily equity turnover up 1.22 times year-on-year to HK$222.8 billion. Southbound Stock Connect flows surged 1.96 times to HK$111 billion daily, while derivatives activity, including warrants and callable bull/bear contracts, increased 72% year-on-year.
The exchange』s connection with Mainland China deepened further. Revenue from Stock Connect jumped 51.21% year-on-year to HK$1.813 billion, representing 12.88% of total revenue, up from 11.29% in the same period last year. Meanwhile, A-share companies increasingly view Hong Kong as a preferred listing venue. By the end of July 2025, at least ten A-share companies, including CATL (03750.HK), Hengrui Medicine (01276.HK), and Haitian Flavouring & Food (03288.HK), were listed in Hong Kong, with around 40 additional companies having filed applications and at least ten more announcing intentions to list. Mainland firms such as Mixue Group (02097.HK), Caocao Mobility (02643.HK), and Greentea Group (06831.HK) have also chosen Hong Kong over A-share or U.S. markets. Secondary listings of Chinese concept stocks, including iQIYI (IQ.US), are also being considered.
Net investment income, a key component of HKEX』s profits, reached HK$2.875 billion in the first half, up 14% year-on-year, accounting for 28.3% of pre-tax profit. Returns are generated from client margin funds and the exchange』s own investments, highlighting a reliance on global interest rates and currency fluctuations. With the U.S. Federal Reserve expected to cut rates and Hong Kong dollar interest rates likely following suit, investment income may face pressure in the second half of 2025, especially with upcoming capital redemptions tied to HKEX』s headquarters acquisition.
While Hong Kong equities have benefited from capital inflows, risks remain. The U.S. stock market has rebounded, with the Nasdaq and S&P 500 hitting new highs, driven by strong quarterly results from tech giants such as Nvidia (NVDA.US). This could prompt international capital to flow back to U.S. equities, adding volatility to Chinese concept and Chinese-funded stocks in Hong Kong. Second-quarter data showed a slight slowdown in HKEX』s core business revenue growth to 31.91%, down from 35.6% in Q1, and average daily equity turnover declined marginally from HK$225.4 billion to HK$220.3 billion.
IPO and post-listing refinancing activity is expected to accelerate in the latter half of 2025, providing more investment options but potentially diverting liquidity from the secondary market. Diversification efforts are also underway, with HKEX making inroads in fixed income and commodities. Collaborations with the Hong Kong Monetary Authority』s Central Moneymarkets Unit and the launch of LME-approved warehouse facilities aim to drive growth in these segments, reducing dependence on equities and creating a more resilient revenue structure.
Overall, HKEX』s first-half results underscore the combined impact of domestic policy support, capital inflows, and investor interest in AI-driven tech stocks. HKEX shares have climbed 52.19% year-to-date, significantly outperforming the Hang Seng Index』s 25.45% gain. The challenge now lies in sustaining momentum amid potential shifts in global capital flows, evolving interest rates, and market volatility.
Hong Kong』s stock market has proven its strength as a hub for international investment and a gateway to Chinese equities. However, maintaining this performance will require the exchange to continue diversifying revenue sources, supporting IPO and secondary market activity, and managing risks associated with interest rate and currency fluctuations. The second half of 2025 will be critical in determining whether Hong Kong can consolidate its gains and retain its status as a leading financial center in Asia.
