388.HK WACC - Weighted Average Cost of Capital

The WACC of Hong Kong Exchanges and Clearing Ltd (388.HK) is 8.9%.

The Cost of Equity of Hong Kong Exchanges and Clearing Ltd (388.HK) is 8.70%.

The Cost of Debt of Hong Kong Exchanges and Clearing Ltd (388.HK) is 121.65%.

	Range	Selected
Cost of equity	7.10% - 10.30%	8.70%
Tax rate	12.60% - 14.30%	13.45%
Cost of debt	4.00% - 239.30%	121.65%
WACC	7.1% - 10.8%	8.9%

WACC

388.HK WACC calculation

Category	Low	High

Long-term bond rate	2.9%	3.4%
Equity market risk premium	6.0%	7.0%
Adjusted beta	0.7	0.92

Additional risk adjustments	0.0%	0.5%
Cost of equity	7.10%	10.30%

Tax rate	12.60%	14.30%
Debt/Equity ratio	0	0
Cost of debt	4.00%	239.30%

After-tax WACC	7.1%	10.8%


Selected WACC	8.9%

388.HK's CAPM model and how its cost of Equity is calculated

The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.

This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.

Here’s how we figure out the cost of equity for 388.HK:

cost_of_equity (8.70%) = risk_free_rate (3.15%) + equity_risk_premium (6.50%) * adjusted_beta (0.7) + risk_adjustments (0.25%)

We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.