HKEX Posts Record First Half as Management Pivots Toward Mainland Insurance Flows, CGB Collateral and Longer Derivatives Hours
Interim results call, August 19, 2026: profit up 24% to HKD 10.6 billion as Beijing opens Southbound ETP access to insurers
Hong Kong Exchanges and Clearing reported its best-ever half-year revenue and profit for the first half of 2026. Revenue and other income rose 19% to HKD 16.7 billion, profit after tax and EPS both rose 24% to HKD 10.6 billion and HKD 8.36 respectively, and the board declared a first interim dividend of HKD 7.43 per share, a 90% payout. The headline numbers were expected given the volume run-rate. The more useful information came from the question-and-answer session, where management disclosed several developments that widen the addressable flow into Hong Kong and signal where the next leg of the multi-asset strategy is heading.
Mainland Insurers Allowed Into Hong Kong ETPs, With More Connect Channels Queued
The most material new disclosure came from CEO Bonnie Chan, who said she had been in Beijing the previous day at the NFRA and that a policy announcement had been made allowing Mainland insurance companies to invest in Hong Kong-listed ETPs through the Connect franchise. She called it "a very major positive development." Implementation details have yet to be published, but the move adds a large, long-duration institutional buyer to a Southbound channel that has until now been dominated by retail and select institutions.
Chan also pointed to two further items flagged by CSRC Chairman Wu Qing at the August 3 launch of the Chinese government bond futures: REIT Connect and a Southbound RMB counter. She said both are progressing well and that "it's a matter of time" before rollout dates are announced. Head of Markets Gregory Yu tied the insurer access to HKEX's index strategy, noting that the exchange has partnered with Korea Exchange on a semiconductor index weighted 60% to Hong Kong stocks and 40% to Korean stocks, and with Bursa Malaysia on a large-cap equivalent. These 60-40 structures are designed to be eligible for Southbound investment. Sector indices and fixed income ETFs are next in the pipeline.
The ETP business is already material. ETPs contributed 17% of headline ADT in the first half, against roughly 5% in 2021. Yu said retail participation has driven the growth, with leveraged and inverse products and covered-call ETFs the standout categories. The SFC has also announced that Hong Kong underlying stocks meeting certain criteria will be eligible for leveraged and inverse products, which should extend that product line.
Northbound Volumes Double, Helped by Eligibility Expansion and a Hot A-Share Market
Northbound ADT more than doubled year on year. Chan said the 2025 average was RMB 212 billion, year-to-date is about RMB 340 billion, and there have been recent days above RMB 400 billion. CFO Herbert Hui attributed part of the jump to a roughly 20% increase in eligible stocks, alongside efforts to reduce friction in the channel. Chan added that A-share market turnover has itself returned to the trillions of RMB on many days, and that several high-profile A-share IPOs are yet to be included in Northbound, which could sustain volumes. The caveat is that this is a cyclical benefit as much as a structural one: a large part of the doubling reflects a hot onshore market.
China Government Bond Futures Off to a Promising Start, With Collateral Eligibility Due This Year
The 5-year CGB futures contract, launched August 3 and described as the only China government bond futures contract available offshore, is early but drawing interest. Yu said that over the past two weeks "almost every single day, there is a new participant placing orders to test it out," with global asset managers and large asset owners engaging. He was careful on scale, calling it "the first very small step" while still a "very significant milestone." The contract covers a single tenor, and additional tenors are planned.
Operations executive Bik Lau added a concrete catalyst: HKEX will open its two largest clearing houses, the futures and options clearing houses, to accept CGBs as collateral before the end of 2026, subject to regulatory approval. This gives investors a practical reason to hold the paper offshore. HKEX is also exploring how to build a repo market. Management separately announced plans to launch FDR007 contracts later this year, again subject to approval, and is working with CFETS on a next-generation fixed income trading platform. The strategic logic is that futures create an offshore price-discovery tool for the CNH curve, which in turn should encourage more CNH issuance and, eventually, cash bond secondary trading. That chain is still largely prospective, and revenue from FIC remains small relative to equities.
IPO Franchise: Record Fundraising, Falling Application Count Dismissed
Hong Kong completed more than 100 IPOs year-to-date, about 105 by management's count, raising USD 41 billion against USD 37.5 billion for all of 2025. Follow-on fundraising has reached over USD 50 billion, against USD 66 billion in the full year 2025. Companies listed since 2025 accounted for more than 8% of record headline ADT, supporting management's argument that capital formation and secondary trading reinforce each other.
HSBC's analyst noted that active applications slipped from the mid-500s to the high 400s. Chan attributed this to conversions into listings and said it should not be over-read: "I really do not think we should be too obsessed with whether it's low 500 or high 400s... the interest has not waned." That is a reasonable explanation, though it is also a reminder that the pipeline figure is no longer rising.
On Citi's question about competition from the A-share market, Chan rejected the cannibalization thesis, arguing that capital-intensive issuers in semiconductors, robotics and AI increasingly seek dual listings, citing CATL and Innolight. She noted that Hong Kong-listed companies are also returning to the Mainland and that the CSRC chairman had endorsed two-way flows. Non-Chinese issuers are an additional lever: Indonesian gold miner Merdeka raised USD 300 million through a secondary listing in the form of HDRs, and about 10 further non-Chinese companies are in the pipeline.
Trading Hours: Derivatives First, Cash Equities Cautious
In response to Nasdaq's extended-hours plans, Lau said HKEX's principle is accessibility rather than "the longer the hours, the better." The next step is likely to be derivatives after-hours trading, currently ending at 3:00 a.m. Hong Kong time following the 2019 extension, which management wants to extend to cover the U.S. close. Lau noted that the closing auction accounts for a significant share of volumes, so "another couple of hours could make a huge difference."
For cash equities, management was more guarded, citing the risk of thinner liquidity and wider bid-ask spreads, and the readiness of banks and custodians. Technology is not the constraint: Lau said the Orion Derivatives Platform brings HKEX "technically" to 24-hour trading. She also noted that severe-weather trading added 7 extra trading days in 2025, each with turnover above HKD 220 billion.
Financial Quality: Costs Rising, Investment Income Under Pressure
The quality of the beat is mixed. Net investment income fell 11% to HKD 2.56 billion, and excluding a nonrecurring HKD 298 million valuation gain on unlisted equity stakes it dropped 21%. The cause is the revised margin rebate arrangement introduced in October 2025, which raises payments to participants, along with lower reinvestment yields. Management guided that second-half investment income will continue to be affected by the rebate arrangement, margin fund size and Hong Kong dollar rates, implying that trading volumes must keep carrying the earnings growth.
Operating expenses rose 6%, but excluding the prior-year HKD 90 million FCA fine, a HKD 24 million insurance recovery related to the LME nickel incident and foundation donations, the increase was 9%. Hui linked this partly to investment in talent for the multi-asset ecosystem. First-half results sat above HKEX's historical trend line, and the second-quarter ADT record of HKD 289 billion sets a demanding base. The shares, at HK$388, trade at 26.4 times forward earnings and have returned negative 12.7% over one year, indicating the market is already pricing in a good deal of cyclical strength.