YWR:EM Exchange Theme Update
Capital was going to flow to EM.
And we wanted the best way to monetise it.
So late 2024 we bought HK Exchange and SGX Group.
Then September 2025 we added B3 to the theme.
So let’s check on how our little money makers are doing.
Hong Kong Exchange (388.HK, $HKXCY)
2025 was a great year for HKEX.
Earnings grew +36% in 2025 and the payout ratio was 90%.
Exactly the dynamic we love.
And we love the operating leverage.
Revenues (blue line) +32% and costs (red line) +5%. A higher tax rate in 2025 was the only drag.
Stock Connect: An exciting trend is the increased use of HKEX as a connection to access mainland Chinese markets (Shenzhen and Shanghai). This works in reverse too with a growing flow of trades Southbound from mainland China to HK. 23% of daily volume on the HKEX is coming through Stock Connect from Shenzhen and Shanghai.
On the product side HKEX is heavily exposed to equities and trying to build out commodities and fixed income. HKEX acquired the LME in 2012 which helped boost commodities to 11% of revenues. HKEX has partnered with the HKMA to develop a fixed income clearing platform called CMU Omniclear. The idea is to create an Asian version of Euroclear.
We have a view that it has become an unspoken Chinese priority to reassert HK as a dominant financial center. China realises financial markets are a form of soft power, and HK is punching below its potential. HK unlike Shanghai, is a brand foreign investors trust. HK could be much bigger in terms of asset management, global listings and global fixed income. And HKEX is the perfect play on this.
So we want to be long HKEX; clipping tickets on every trade as assets reallocate from Europe to China and the Chinese asset management industry catches up to the West.
The 2002-2007 Bull Market: 36% EPS growth is great start, but my view is the good times haven’t really started yet. If we get a real HK bull market again, similar to what we had in 2002-2007, earnings are going to grow beyond our imagination. From 2002-2007 HKEX earnings increased 9x ($0.57/share to $5.78/share). In comparison for 2025-2028 I doing the normal zero imagination analyst thing and predicting +37% EPS growth over the next 2 years.
I know the EPS can be a lot higher, but I’m too scared to put it down on paper. But it’s also why I know I want to be long HKEX as the best way to play a China bull market and don’t fuss too much about the P/E. Plus I love the 90% payout ratio.
Link to my HKEX model at the bottom of the post.
SGX Group (S68.SG, $SPXCY)
HKEX has the massive Chinese equity market with non-stop tech IPO’s.
But what do you do if you are Singapore Exchange?
You have a small local equity market, and occasional new listings, but otherwise how do you grow?
The scrappy Singaporeans have been building SGX into an Asian hedging platform with derivatives contracts for hedging Asian FX, Asian Equity indices and Asian commodities like Iron Ore, Freight and Rubber.
The SGX share price has performed well (+48% over the last year), but the earnings momentum has been less than at HKEX. Adjusted 1H 2026 EPS growth (December 2025) was just +11.7%.
The drag has been equity derivatives, which surprisingly have not been growing.
BTW, slow growth in equity futures volumes has been a theme across HKEX, SGX and B3. I’m not sure the problem. Are traders switching to options instead of futures? You tell me.
Like with HKEX it is hard to predict SGX future earnings. As analysts we always put in 10-15% volume growth, when reality could be 30-50% in a bull market. Still, I feel like the SGX share price is up with events here.
Let’s say SGX earns 90cts in 2028 and we put it on 25x then the PT is S$22. But who knows. There is so much operating leverage in these exchanges. Maybe SGX will earn S1.50 in 2028 and the stock will be trading at S$37. In the meantime I will keep reinvesting all the dividends back into more shares.
My SGX EPS forecasts through 2028.
Link to my SGX model at the bottom of the post.
B3 (B3SA3, $BOLSY)
The best time to buy exchanges is when the market is dead, but you think things are going to pick up. Then you when sentiment improves you get a double whammy. Investor expectations about future volume growth and earnings improves plus the P/E rerates.
That’s was the attraction of B3 in September last year when it was trading on a P/E of 13x. Nobody liked Brazil and nobody cared about B3 either (Making Money in Exchanges). Now here we are with the share price 27% higher (plus dividends)
But do you want to know the interesting thing?
B3 still looks good. On my estimates (and I’ve warned you exchange estimates are hard to forecast) B3 is trading on a P/E of 14.6x 2026 estimated EPS of R1.16 and 12.4x the 2027 estimated EPS of R$1.37.
And like with HKEX. We haven’t even really gotten started with the EM bull market. Brazil is still on the lows.
Yes, the B3 EPS grew 13% in 2025, but it was from data solutions (+15%), and fixed income revenues (+23%). Equity revenues were -2.45% yoy.
It’s actually amazing that B3 can grow EPS 13% when cash equity earnings are declining.
But the Brazil bull market may have finally started. Cash equity volumes in 1H 2026 are off to a strong start through February.
If we are patient and we get a real Brazil bull market we could see B3 earn $1.60/share in 2028 and trade on a P/E of 18x or R$ 28/share (+64%).
Summary
This isn’t financial advice, but I think the EM bull market has barely started and we have a lot more to go with HKEX and B3 in particular in the years ahead.
Below are links to the YWR models for B3, HKEX and SGX. There are also on the YWR website.
