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Hong Kong Exchanges & Clearing:New "norm" or normalisation ahead?

研究机构:瑞银证券 研究员:Stephen Andrews 发布时间:2015-02-02

Average daily turnover (ADT) strong in December and January

It has been a good start to 2015 for HKEx. Following an unusually strong Decemberthat saw ADT of HK$96.6bn, January has seen momentum continue with ADT runningat around HK$99bn with just a couple of days to go. We are upgrading our FY15 ADTforecast to HK$80bn. Stock connect has made a successful start with aggregatebuy/Sell orders averaging an additional HK$8bn of ADT (of which HKEx has a 50%economic interest). Aggregate quotas on both the northbound & south bound legs arecurrently 30% & 9% filled respectively so significant capacity remains.

Where has the upside come from… surprisingly not MMA?

China has been the key driver in the pick-up in activity, but this is not simply MMArelated. The biggest incremental gains have come in higher H-share equity velocity &also in the "unit trust" business. The latter has increased to c15% of mainboardturnover (Vs c4-5% normally) and is primarily related to China A50 ETFs. So renewedinvestors interest in Chinese equities post the easing of monetary policy in late

November that saw China A50 ETFs rise +30% in December has in our opinion beenthe main driver of activity, not simply MMA.

Is this a "new normal" or do we face a normalisation as the China rally fades?We note that since the launch of MMA in mid-Nov HKEx has under-performed both theHang Seng and Shanghai Composite indexes. The key question going forward for thestock is are activity levels at a "new norm" or are we in danger of a "normalisation"back to lower activity levels if the current rally in China equities fades. Our forecasts areset based on the latter hence our cautious stance. We note that LME volumes ended FY14 up just 3-4% yoy and we have just 5% growth pencilled in for 2015.

Valuation: Higher ADT forecast drives slight increase in target price

We value LME at HK$13, equivalent to 17x FY15E net profit (post financing costs). Therest of HKEx we value using a regression analysis using our 1 year forward ADT forecastof HK$80bn which gives a value for the core equity/derivatives/clearing business ofHK$155. This results in an aggregate target price for the group of HK$168

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