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RHB: HKEx Prices Turning Attractive Again, Buying Recommended
Aspire, Hot Picks | 16 July 2015
By: Chen Xushuang
Articles (26) Profile

Despite the fact that HKEx’s share prices has recently experienced its longest losing streak on record, RHB Group now views HXEx’s prices as “attractive”, and has raised its recommendation status from “neutral” to “buy”.

Expected Growth Figures

RHB Group expects HXEx’s price to exceed 10% over the next 12 months, and reach the target price of HKD 278.00 from the current price of HKD 230.2 (as of July 16, 2015). Net profit growth for FY15 and FY16 is forecast to be 71% and 13% respectively.

This optimism is backed by the robust average daily turnover (ADT) of Hong Kong’s security market of HKD 127.3 billion Year to Date, which was mainly brought about by the strong 2015 second quarter ADT of HKD 162.9 billion.

Reasons to Believe in Growth

In its SWOT analysis of HKEx, RHB pointed out that HKEx is well-positioned to capitalise on the internationalisation of the CNY. Mutual stock market access between China and Hong Kong also provided opportunities for tie-ups that may lead to higher trade volumes and improved liquidity.

Previously, the Shanghai-HK Stock Connect has led to a sharp increase of ADTs for HKEx.

Considering that Shenzhen Stock Exchange has a turnover velocity even higher than that of Shanghai, RHB expects the Shenzhen-HK connect to serve as a positive catalyst that can increase investor interest in HKEx.

Destabilising Factors

However, an open economy also means that HKEx’s fortunes could be adversely affected by volatile and unpredictable global economic conditions.

For instance, the recent weakness in the China equities market may be a hindering factor that prevents HKEx trading volume from going forward. As reported by The Wall Street Journal, the Chinese government’s interventions have failed to prevent China’s stock markets from sliding, and have even led to widespread anxiety among Chinese investors. According to South China Morning Post, HKEx was also among the hardest hit in the slump triggered by the central government’s selling down of two major banking stocks.

Nevertheless, RHB stated that whilst the equity market uncertainty might lead to short-term HKEx share price volatility, any share price weakness should make HKEx even more attractive.

As a Communications Studies graduate specialising in journalism, Xushuang is keen to observe and explore issues that readers want to know more about, and to deliver quality content through engaging writing.

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