HKEx may still be your best bet

China Daily (Canada) - - HONG KONG -

Hong Kong Ex­changes and Clear­ing (HKEx), which holds the mo­nop­oly to op­er­ate the city’s stock and futures mar­kets, was the stock mar­ket dar­ling not too long ago. But since the mar­ket turned from boom to bust in June last year, it was rel­e­gated to the dump heap by stock an­a­lysts and in­vestors with a short mem­ory and an even shorter at­ten­tion span.

HKEx has just an­nounced a ster­ling per­for­mance for 2015 with profit hav­ing surged 54 per­cent from a year ear­lier to a record HK$7.96 bil­lion. De­spite beat­ing an­a­lysts’ pre­dic­tions, the re­sults have failed to im­press in­vestors and lift the com­pany’s share price.

It is just that in­vestors are tak­ing the view that the eco­nomic down­turn will con­tinue to de­press cor­po­rate earn­ings in the com­ing months, chip­ping away at what­ever is left of the in­cen­tive to in­vest in stocks. The re­sult­ing de­cline in turnover would pro­long the dol­drums and dis­cour­age lo­cal and main­land com­pa­nies from rais­ing cap­i­tal by is­su­ing new shares at a widen­ing dis­count.

The ef­forts of HKEx Chief Ex­ec­u­tive Charles Li Xiao­jia to ex­pand into new busi­nesses and mar­kets are also seen to be fac­ing head­winds.

The com­pany’s pro­posal for a third mar­ket for high-tech star­tups was chal­lenged by reg­u­la­tors who are work­ing to cor­rect al­leged abuses of the ex­ist­ing Growth En­ter­prise Mar­ket.

But re­cent de­vel­op­ments in global mar­kets and the Chi­nese main­land econ­omy may sug­gest that the outlook is not that dim af­ter all.

The lat­est US job fig­ures in­di­cate that the econ­omy is hum­ming along in­stead of stalling as some econ­o­mists had pre­dicted. Oil prices, which are widely taken as a barom­e­ter of global eco­nomic health, are sta­bi­liz­ing.

Con­trary to ear­lier es­ti­mates, Ja­pan’s econ­omy has per­formed bet­ter than pre­vi­ous data had sug­gested. And Europe is show­ing signs of emerg­ing from the eco­nomic slump as the ef­fect of un­usu­ally low in­ter­est rates be­gins to take hold.

More im­por­tant to Hong Kong is that the Chi­nese main­land au­thor­i­ties have set the base­line of eco­nomic growth at 6.5 per­cent a year. This has helped dis­pel any fears of a hard land­ing that could have had se­ri­ous reper­cus­sions in Hong Kong.

If you, like many other in­vestors, see HKEx as the stock mar­ket proxy, you may want to con­sider buy­ing its shares now while prices are still low.

It may be pru­dent to buy Hong Kong Ex­changes and Clear­ing shares while prices are still low.

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