Hong Kong Exchanges & Clearing 2008 EPS estimate raised by 51 pct - Citigroup
Citigroup said Tuesday it has raised its 2008 earnings per share forecast for stock exchange operator Hong Kong Exchanges & Clearing (HKEx) by 51 percent on hopes of strong fund inflows from mainland China and increased trade in the local stock market.
""On the back of stronger-than-expected third-quarter volume and the expectation that selective QDII funds will come through over the next couple of years, we have raised our 2008 earnings forecasts,"" said Citigroup analyst Bob Leung.
Citigroup raised its 2008 EPS estimate to 6.88 Hong Kong dollars from 4. 56 dollars.
The QDII, or qualified domestic institutional investor scheme allows certified Chinese institutions to invest outside the mainland. Recently, investors in Hong Kong have been piling up local stocks in the belief that they will benefit from QDII capital inflows.
Citigroup has raised its price target for HKEx to 219.20 dollars from 133. 10 dollars after revising its earnings estimate.
But Citigroup said the benefits to the local stock market from Hong Kong's ties with China have their limits.
""We do believe in the long run the Hong Kong market in fact would lose out on QDII, as the H-stock space is not a diversified enough space for Chinese investments,"" Leung said.
Investors are advised to be ""rational"" about reports concerning the dynamics between yuan-denominated A-shares listed on mainland markets and H-shares, or stocks of mainland companies listed in Hong Kong, he said.
""HKEx's management reaffirmed our view that it is not possible at this stage for HKEx to swap shares or have any M&A action with Shanghai or Shenzhen Exchanges while they are not incorporated with shareholding structures,"" said Leung.
""Even if the Hong Kong government swaps the shares it owns with Chinese authorities, this does not add any real value to HKEx shareholders whatsoever, "" he said.
""Lifting free-float of A-shares is the real solution to the A-H stock price gap in our view,"" he said.
HKEx closed Tuesday up 1.00 Hong Kong dollar or 0.4 percent at 253.60 dollars