HKEX 0388

[winston]

Not vested. From UOBKH:-


Valuation/Recommendation

While ADT has softened recently, we still believe HKEx is still in the upcycle as the current daily market turnover is around HK$68b, far below the last peak ADT of HK$177.7b in Oct 07 when the share price was over HK$260.

This represents a significant upside from the current level. Maintain BUY.

[winston]

The Dark Pools are coming ...

Investment Technology Opens Dark Pool in Hong Kong (Update1) By Nina Mehta

March 17 (Bloomberg) -- Investment Technology Group Inc. is expanding its Posit Marketplace private trading platform into Hong Kong stocks starting today, said Clare Rowsell, head of client relationship management in Asia for the firm.

Executions will take place at the midpoint of the best bid and offer on the Hong Kong Stock Exchange. The New York-based broker will expand Posit Marketplace to Australian stocks in the second quarter and in Japan stocks later this year. ITG traded 1.9 percent of U.S. equities last month.

“Finding liquidity is a challenge for the buyside in Asia,” said Rowsell of ITG Hong Kong. ITG is starting the initiative in Hong Kong because client demand for the private venues has been strongest there, she said.

Dark pools, trading platforms that execute stock without displaying prices, are developing in Asia for brokers and institutions seeking to transact without going to public stock exchanges. There are about 40 dark pools in the U.S.

More than 100 clients will have access to Posit Marketplace in the early stages of the system, according to Rowsell. These include regional firms in Asia, global brokers with Hong Kong trading desks, and other clients outside the region executing Asian securities.

ITG has had a crossing system in Hong Kong that matches buy and sell orders at specific times. Posit Marketplace will allow continuous matches of buy and sell interest throughout the day. It will also route orders to dark pools operated by other brokers. Rowsell declined to name those venues.

Seeking Liquidity

“Asia is in the early stages of what the U.S. and Europe have gone through in terms of the fragmentation of markets and trading venues,” Rowsell said. The ability to access dark venues through an algorithm benefits investors searching for liquidity, she added.

Trading costs for institutional investors are two-thirds higher in Asia than in the U.S., Rowsell said. The cost averaged 96 basis points in Asia in the fourth quarter, according to ITG data.

ITG’s Posit dark pool accounts for one-third of the broker’s trading in the U.S. and “roughly” a third in Europe, Rowsell said. She declined to estimate how much volume in Hong Kong stocks Posit Marketplace might execute by the end of the year.

Electronic trading in Asia is increasing. Last year, 18 percent of equities trading in Asia took place electronically, according to research firm Greenwich Associates in Stamford, Connecticut. The firm said it would rise to 28 percent by 2012.

http://www.businessweek.com/news/2010-0 ... ate1-.html

[winston]

Not vested. From Phillips:-


Revised ADT and Turnover Velocity Estimate

ADT of the first two months is only HK$68bn, to meet our previous estimates, ADT of the remaining 10 months need to be over HK$102bn. As we believe the market sentiment will not be so good in the short term, we revise downward full year ADT estimates to HK$77bn, the corresponding TV estimates is 115%.


Recommendation

When ADT keeps at current level for one or two more months, HKEx will drop more to reflect the expectation of its full year profit. We assign “Trading Sell” for HKEx with 3-month target price of $109.5, about 19.8x 2010E P/E which is the mean of last 7 years` forward P/E.

We believe HKEx will underperform and its total return is expected to be below HSI's by 5% or more in the coming 3 months.

[winston]

Not vested. The dark pools are already in Asia...

From Phillips:-

Revised ADT and Turnover Velocity Estimate

ADT of 1Q10 was HK$64.8bn, to meet our previous estimates, ADT of the remaining 9 months need to be over HK$80bn. As the market sentiment is still not good enough in 2Q, we revise downward full year ADT estimates to HK$70.7bn, the corresponding TV estimates is 100%.

ADT was steadily rising in the past 2 months; and IPO market in HK continues to be benign, increase in total market capitalization will have positive impact on ADT, we believe ADT will pickup in second half and further increase in the coming year.


Valuation

With our new ADT estimate, HKEx's FY10E EPS is revised downward by 11.9% to $4.88. We believe the market sentiment will become better in the second half and the market turnover will be higher. We set our target FY10E P/E at 27.4x which is 1 s.d. above mean, our 12-month target price is HK$151.5. There is 28% potential relative to the last close. We maintain our “BUY” rating.


Key Risk

- Lower than expected market turnover
- Rebound of global market ended and market sentiment squeeze

[winston]

Turnover has been pathetic over the past 2 weeks.

IPO market has been weak as well.

Price has dropped 23% from the range high.

Will turnover be high going forward ?

Unfortunately, I dont like to short a monopoly...

[winston]

Not vested

UPDATE 1-HKEx posts flat Q3 net, beats forecast

* Q3 net profit HK$1.22 bln versus forecast HK$1.13 bln
* Q3 avg daily turnover down 7 pct yr/yr, down 2 pct q/q
* Shares up 39 percent so far, outperforming broad market (Add details, quotes)

HONG KONG, Nov 10 (Reuters) - Hong Kong Exchanges and Clearing (HKEx) <0388.HK>, the world's top exchange operator by market value, said its July-Sept net profit was largely flat from a year earlier and was seen facing increasing competition from China and an underlying threat from a merger of the Singapore and Australia exchanges.

Concern over the longer-term competitiveness of Hong Kong's stock exchange has grown, with average daily turnover down 2 percent in the third quarter as compared to the second quarter and was down 7 percent in the third quarter year on year, despite the stock market notching an 11.1 percent gain for the quarter.

"Fuelled by the recent vibrant trading activity, a surge in new listing of companies from the mainland and overseas, and continuous growth of the mainland and Asian economies, we remain cautiously optimistic about the further growth of our securities and derivatives markets," Chairman Ronald Arculli said in a statement.

Average daily turnover, the key determinant of exchange revenue, fell to HK$61.8 billion in the third quarter, compared with HK$66.7 billion a year earlier. It fell from HK$62.9 billion in the second quarter as investors turned cautious despite a recovery in the market.

Listing fees rose 14 percent from the second quarter after an IPO market revival as rising risk appetite and a share price recovery encouraged companies and investors to return to the primary market.

EARNINGS DOWN IN SLUGGISH VOLUME HKEx, the No.1 exchange operator ahead of CME Group Inc , reported a net profit of HK$1.22 billion ($157.4 million) for the third quarter ended Sept. 30, largely flat from a year earlier on sluggish market volumes and as a low interest rate environment continued to drag on investment income despite a rebound in the IPO market.

That compared with an adjusted net profit of HK$1.23 billion a year earlier. The result beat an average forecast of HK$1.13 billion from four analysts, and was higher than the second quarter's HK$1.13 billion.

Regional rival Singapore Exchange Ltd last month reported a 21 percent fall in net profit for the quarter ended September on lower trading volumes and higher technology-related expenses. [ID:nSGC003779] Analysts generally hold a positive view of HKEx on the back of a string of IPOs, including its biggest-ever by AIA Group Ltd <1299.HK>, while the recent proposed merger between Australia's stock exchange operator and Singapore Exchange has triggered concern about a potential threat.

HKEx shares have risen about 39 percent so far this year, beating a 11.7 percent gain in the broader market <.HSI>.


Source: Reuters

[winston]

not vested

DJ MARKET TALK: HKEx +3.8%; L/T Opportunity, Buy On Weakness - JPM

1528 [Dow Jones] HKEx (0388.HK) is up 3.8% at HK$133.30, supported by a strong turnaround in the HSI in the afternoon, with the index +1.5%, as hopes over potential China policy easing, are likely to continue boosting the overall trading sentiment in the local market.

JPMorgan says short-term risks for HKEx appear more balanced and the stock should move in-line with trading volume and market beta.

"HKEx provides long-term opportunity and we would recommend buying on weakness primarily driven by higher ADT (average daily turnover) in future."

It tips ADT to be higher on velocity improvement on the back of a consistent listings pipeline and CNY internationalization, which offers long-term opportunity for the exchange.

It keeps HKEx at Overweight with a target of HK$168.00.

Source: Dow Jones Newswire

[winston]

not vested

HKEx Q3 net profit up 1 pct, lagging forecast

HONG KONG, Nov 11 (Reuters) - Hong Kong Exchanges and Clearing Ltd (HKEx) <0388.HK>, the world's biggest exchange operator, said on Wednesday its third-quarter net profit rose a worse-than-expected 1 percent, as weak markets weighed on earnings.

HKEx said it made a net profit of HK$1.24 billion in the July-September quarter, higher than the HK$1.22 billion recorded a year ago but worse than the HK$1.36 billion expected by a Reuters poll of four analysts.

Regional rival Singapore Exchange warned that market activity could be hit adversely in the short term last month, hit by uncertain global financial markets and continuing macroeconomic challenges in the U.S. and Europe.

Source: Reuters

[winston]

not vested

DJ MARKET TALK: HKEx Down 1.2%; Unattractive Valuation - GuocoCap

1529 [Dow Jones] HKEx (0388.HK) is down 1.2% at HK$119.20, after hitting its fresh month-to-date low at HK$118.20, but remains comfortably above its October trough of HK$99.15;

The stock has been hit by broader market weakness, with the HSI losing six of its past seven sessions.

GuocoCapital says HKEx has underperformed the HSI by 2.0% month-to-Tuesday and 11.2% in the past three months.

"We believe lower-than-expected third quarter earnings and a contraction in stock market turnover were key reasons."

The average daily stock market turnover dropped to approximately HK$62 billion month-to-Tuesday vs about HK$$71 billion in both September and October.

In terms of valuation, HKEx is currently trading at 2011 P/E of 25X (vs the HSI's 10X), flat earnings for 2011 and a dividend yield of 3.5%, which remains unattractive to long term investors, it adds.

It keeps a Reduce call with a target of HK$110.00.


Source: Dow Jones Newswire

[iam802]

If Hong Kong is losing it...you can be sure that SGX will be struggling...

--
World No. 1 IPO Venue Loses Steam

http://blogs.wsj.com/deals/2012/02/17/w ... od=WSJBlog

For a city where initial public offerings are the bread and butter for armies of lawyers, bankers and accountants, 2012 is getting off to a bad start.

According to data from Thomson Reuters, Asia is seeing the biggest decrease in terms of equity issuance globally year-to-date, 69% lower than the previous year.

Hong Kong, which has proudly topped the IPO league tables for the last three years, is seeing its worst year since 2003. Only US$875 million has been raised so far this year, via 27 deals. That’s just 1.5% of global market share, a huge drop from 81% the same period last year. In contrast, equity deals in the U.S. account for 43% of the global total via 91 deals.

But a particularly long holiday season and a market downturn towards the end of 2011 means there are plenty of deals to be done that have been delayed. Thomson Reuters estimates that Hong Kong could see $15.5 billion worth of equity offerings to be completed by the end of the first quarter this year, including a $1 billion IPO by jeweler Graff Diamonds.