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Louis Wong: The Raging Bull Run Continues; Buy HKEx
Aspire, Thought Leaders | 29 May 2015
By: Vance Wong
Articles (74) Profile

Following Louis Wong’s bullish sentiments about the Shanghai-Hong Kong Stock Connect (SHKSC), he expanded further during his speech at our latest Shares Investment Conference (SIC) 2015 Mid Year Review (MYR).

He laid out the benefits that the SHKSC had brought to the table for both cities and affirmed his view that the bull run will continue, especially in Hong Kong.

HSI To Hit 30,000

Hang Seng Index as at 28/05/2015; Source: FactSet Fundamentals

Louis Wong feels that in view of the SHKSC materialisation, the amount of funds flowing from the China market into the Hong Kong market (southbound money) has been increasing exponentially, pushing the Hang Seng Index (HSI) higher.

One possible explanation for this is the discounted values of H-shares against their A-share counterparts. As such, after the SHKSC materialised, it allowed many Chinese investors to look for profits from buying discounted H-shares.

However, Louis feels that despite the discounted values and certain investors buying H-shares, they are still considered “cheap”. No matter how we look at it, the SHKSC has benefited the Hong Kong market to a huge extent, while also opening opportunities to Chinese investors.

China Will Benefit From Shenzhen-HK Connect Too

With the preparations for a Shenzhen-Hong Kong Connect Scheme underway as well, it is no wonder Louis is so bullish about the HSI and the Hong Kong market in general. Furthermore, the Shenzhen SE Composite Index is remodelling, including up to 500 listed companies.

This would give global investors a bigger exposure to not only blue chips, but also the rising small- and mid-cap stocks. Additionally, with China’s liberalisation policies and A-shares possibly getting into the MSCI Emerging Markets Index, more international investments would flow into China.

Buy HKEx; Target Price HK$388

Although Louis only touched on one Hong Kong stock, Hong Kong Exchanges & Clearing (HKEx), he showed that it is quite a promising stock pick, especially for investors interested in the Hong Kong market.

Its revenue in 1Q15 is HK$2.79 billion, up 20 percent from 1Q14, which was HK$2.33 billion. Operating expenses decreased from HK$734 million to HK$718 million, but both the Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) and net profit increased by more than 30 percent.

Furthermore, Louis pointed out that HKEx has future business plans of linking commodity markets between Hong Kong and Mainland China, giving investors a wider exposure to stocks from both cities.

Analysts' estimates of Hong Kong Exchange & Clearing Ltd as at 28/05/2015

As can be seen from the graph above, there is a general positive sentiment among analysts about HKEx even after the sudden spike in share prices. HKEx’s share price also appreciated by a few basis points since Louis’s recommendation last week. Could it eventually rise to HK$388?

With a Communications background, Vance has the passion to write with a purpose - to provide content supported with substantial evidence to vested readers.

Please click here for more information about this author.

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