The Zhitong Finance App learned that Western Securities released a research report stating that on October 16, the Hong Kong Stock Exchange (00388) published the “Consultation Summary on Shortening the Settlement Cycle of the Hong Kong Stock Spot Market” and implementation roadmap. In an overseas interest rate hike environment, the Hong Kong stock ADT was -36.25% year-on-year, and the decline in liquidity put a phased pressure on performance and valuation; however, the implementation of T+1 promoted the improvement of capital efficiency, combined with deepening connectivity and continued reform of the listing system, and the center of activity in Hong Kong stock trading is expected to rise. Optimistic about the company's allocation value in the medium to long term. The company's net profit is estimated to be +11.5% year-on-year to 19.79 billion yuan in '26.
The main views of Western Securities are as follows:
The pace of implementation of Hong Kong stock T+1 is steady, and the direction of integration with mainstream global markets is clear
At the time point, the Hong Kong Stock Exchange plans to complete the transition from T+2 to T+1 in the second half of 2028 on the premise that the market is ready and approved by regulators. In terms of scope of application, T+1 covers transactions on secondary market exchanges (stocks, ETP, structured products and debt securities) and physical settlement after the exercise and transfer of stock options. The initial public offering and northbound trading with the Shanghai and Shenzhen Stock Connect maintains the current settlement schedule. Globally, markets that have implemented T+1 include mainland China, India, the United States, Canada, Mexico, etc. The EU/European Economic Area, the United Kingdom, and Switzerland will achieve T+1 settlement in 2027. According to estimates by the Hong Kong Stock Exchange, about 88% of transactions in the global spot stock market will use T+1 or T+0/T+1 settlement by 2027. Shortening the settlement cycle will directly reduce the risk of unsettled positions, improve the efficiency of capital use, strengthen financial connectivity between Hong Kong and overseas markets in the context of major global markets shifting to T+1, and further strengthen Hong Kong's competitiveness as an international financial center.
In terms of supporting arrangements, the Hong Kong Stock Exchange has adopted a three-tier plan to ensure a smooth transition in the market
The first layer enhances its own post-transaction infrastructure and operating model, including extending the processing period for settlement instructions and enabling real-time input and status updates of settlement instructions; the second layer develops targeted workflow tools and services, and also launches an exchange-traded product (ETP) platform to promote the digitalization and standardization of ETF primary market subscription and redemption activities; and the third layer coordinates market practices and preparations throughout the industry. The three-tier solution enhances the automation and transparency of post-transaction processes, and lays the foundation for further integration with global settlement standards.
Risk warning: A sharp correction in the equity market, the reform of the listing system falls short of expectations, etc.