20131111-美银美林-Expecting_small_improvement_in_turnover_into_4Q13_15页_882kb

Summary of Market Trends and Broker Performance in October 2013

Core Content

This report provides an overview of the performance of equity markets in Hong Kong and China for October 2013, highlighting trends in turnover, equity indices, volatility, and analyst sentiment. It also includes a comparison of valuations for exchanges and brokers in the region and globally, along with key developments in the capital market sector.

Key Market Highlights

Turnover

• Hong Kong (HKEx): Average daily turnover (ADT) fell by 2.4% MoM to HK$57.9bn, but increased by 10.7% YoY. The report expects a small improvement in 4Q13 to ~HK$65bn, reflecting seasonality.
• China (SHSE + SZSE): ADT declined by 8.9% MoM to RMB159.8bn, but rose by 122% YoY. The SHSE and SZSE both saw declines in their indices due to weaker sentiment and uncertainty ahead of government meetings.

Equity Indices

• Hong Kong:
  • HSI increased by 1.5% MoM to 23,206.
  • HSCEI rose by 3.0% MoM to 10,627.
• China:
  • SHCOMP fell by 1.5% MoM to 2,142.
  • SZCOMP dropped by 3.4% MoM to 1,021.

Volatility

• HSI 30-day volatility decreased to 13.8%, down from 16.3% in July.
• HSCEI 30-day volatility also dropped to 16.3%.
• The option implied probability of a 10% fall in the next month fell for both indices, from 2.7% to 0.9% for HSI and from 6.9% to 4.5% for HSCEI.

Analyst Sentiment and Price Objectives

• Consensus price objectives for the HSI increased by 1.7% to 25,104.
• For the HSCEI, the consensus price objective rose by 1.2% to 12,211.
• China GDP growth is expected to moderate to 7.7% in 4Q13 from 7.8% in 3Q13. The report anticipates a slight revision of the street's existing forecasts.

Broker Performance

• HKEx (388.HK): Reported a small beat in 3Q13 due to a one-off tax gain and better cost control. However, the firm is considered expensive relative to peers and retains an underperform rating.
• CITICS (6030.HK): Showed strong 3Q13 results driven by high market turnover. It remains the top pick among China brokers with a buy rating.
• HTS (6837.HK): Maintained a neutral rating. While the company reported stable market share in brokerage, its share in margin financing and securities lending has declined since 2012.
• GXYS (6881.HK): Expected to benefit from continued market turnover in 2H13. The report maintains a buy rating.

Capital Market Trends

• Funds raised in Hong Kong totaled HK$40bn in October, up by 70% MoM.
• Active IPOs in the region decreased to 89 in October from 120 in September.
• HKEx's premium to the Hang Seng Index on a P/E basis remains at historic highs.
• CITICS A-shares trade at a 7.4% discount to H-shares, while HTS A-shares trade at a 27.3% premium to H-shares.
• CITIC Securities reported a significant increase in revenues and net profit, up by 309% MoM and 490% MoM respectively, to RMB1,355mn and RMB647mn.

Monthly News and Developments

• HKEx:
  • Considered adding Yuan futures to after-hours trading.
  • Charles Li suggested exploring multiple share classes for innovative companies.
• LME:
  • Proposed new delivery rules to address delays.
  • Considered adding monthly metals futures to its contracts.
  • May establish commodities warehouses in China's Shanghai free trade zone.
• China:
  • CSRC drafted a plan for A-share preferred stock sales.
  • Approved 3 QFII and 2 RQFII institutions in September.
  • Approved 10 IPO applications as of October 17, with 30 approved this year out of 311 total applications.
  • Considered adopting ‘T+0’ trading in the A-share market.

Valuation Comparison

Exchanges

Brokers

Key Information

• The report anticipates a small improvement in Hong Kong's turnover for 4Q13 due to seasonality.
• Despite a decline in October, China's turnover remains strong with a significant year-on-year increase.
• Analyst optimism is noted, with increased price objective forecasts for both the HSI and HSCEI.
• HKEx is considered expensive relative to peers, while CITICS is highlighted as a top pick.
• CITIC Securities and Haitong showed strong financial performance in October, with significant revenue and profit increases.
• The Hang Seng China A/H Premium fell in October, indicating A-shares are trading at a discount to H-shares.
• The report includes important disclosures regarding potential conflicts of interest and the source of data.