Growth vs. governance: Navigating the ASX’s HY26 results
Following the release of its Half-Year 2026 (HY26) results, the Australian Stock Exchange (ASX) finds itself at a crossroads, balancing record-breaking volumes with significant regulatory and management hurdles.
Volumes and new models
Despite the noise, the ASX’s core business is thriving. The HY26 results showed a significant growth beat, driven primarily by cash volumes, clearing, and bonds, with daily trading volumes having surged above $8 billion.
A major structural shift is also on the horizon as the ASX transitions to a Regulated Asset Base (RAB) model for clearing and settlement. This move is expected to provide a stabilised circa 11.5 per cent return, offering a clearer financial path forward as the exchange modernises its infrastructure. Additionally, the exchange is diversifying into new territories, including a gold options product, a “data sphere” offering, and initiatives in property and decarbonisation.
The growth comes at a steep price. Total expenses rose by 20 per cent during the period, attributed to higher Depreciation & Amortisation (D&A) and costs associated with the ongoing ASIC inquiry. This regulatory scrutiny has had a direct impact on shareholders, with the dividend payout ratio cut again to the 75-85 per cent range.
FY26 costs are expected to grow by an additional 20-23 per cent, while capital expenditure (capex) is projected to remain flat at $170-$180 million. This focus on spending is necessary as the exchange addresses the Australian Securities and Investments Commission (ASIC) interim review findings and manages Phase 1 of the Clearing House Electronic Subregister System (CHESS) replacement project in April.
Management in transition
The exchange’s governance is under significant pressure, leading to the announcement that the CEO will leave following the ASIC review and the initial CHESS rollout.
This leadership transition is not unique to the ASX, however the ASX’s new leadership will need to stabilise a team that has grown to 1,360, while fending off potential competition from a New Zealand or Singaporean entrant.
The ASX’s internal struggles are also unfolding amid broader market euphoria, prompting some analysts to warn of a market bubble. While speculative assets soar, the actual profit for ASX 200 companies is expected to fall by 1.7 per cent in the current reporting season.
Valuation
Despite a 20 per cent cost increase and management turnover, several analysts consider the ASX’s fundamental value compelling for long-term investors. While the monopoly status is compelling, investors should note that the ASX cannot open another exchange on every street corner, limiting its growth drivers to volume, new products, and price increases for existing products. Analysts currently value the ASX at $65 to $70 per share, implying a 25x FY26 multiple. This valuation might be justified by the exchange’s monopoly status, high regulatory barriers to entry, and the sustainable growth expected from derivative trading, with the latter, however, dependent on continued market buoyancy.
Between the final ASIC report and the CHESS go-live, the ASX needs to prove it can convert its high volumes into stable, long-term returns without further regulatory stumbles. In the absence of this, the ASX becomes a leveraged play on stock market direction.
Disclaimer:
The Montgomery Fund, The Montgomery [Private] Fund, The Australian Eagle Trust, and the Australian Eagle Equities Fund owns shares in the Australian Securities Exchange (ASX). This article was prepared 14 February 2026 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade ASX, you should seek financial advice.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
He is also author of best-selling investment guide-book for the stock market, Value.able – how to value the best stocks and buy them for less than they are worth.
Roger appears regularly on television and radio, and in the press, including ABC radio and TV, The Australian and Ausbiz. View upcoming media appearances.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
