Updated: Aug 1, 2021
HK Exchange (388.HK):
Stock exchanges benefit from their asset-light business model in that they really need not add in too much investment in order to scale up their businesses.
Bloomberg’s Total Return Analysis function showed that over the past 5 years, HKEx’s share price grew at a compounding rate of 21% p.a. and at almost 25% with its dividends reinvested into the stock.
Moreover. it is such a cash-generating machine that out of its current Market Capitalization of HK$708b, its balance sheet is sitting on Total Cash of HK$309b & having only a miniscule debt of HK$3b.
More importantly, HKEx may have an interesting angle opening up now due to the following 3 push/pull factors:
1) PUSH - Since 2018, there has been, in general, selling pressure weighing down on US listed Chinese stocks due to Trump's previous executive order to ban U.S. investment in companies with alleged ties to China’s military.
2) PULL - With the recent Didi IPO debacle, we are likely going to see more Chinese IPO aspirants seriously considering the 'coming home' strategy to list in HKEx or Chinese exchanges.
3) PULL - There may be a preference to list in HKEx so as to avoid scrutiny from Chinese regulators.
Though already a large cap stock, HKEx was still growing its top line at a compounding rate of 10% p.a. over the past 10 years. As mentioned above, this growth is likely to continue, if not accelerate for the next couple of years due to the current geo-political environment and the huge marketplace that it can potentially tap into.
HKEx Daily dated 14 Jul 2021
From its daily chart, we are seeing a consolidation into an ascending triangle formation over the past 3 months and price had recently broken out of the formation with an expanding volume as additional support. Next resistance is around HK$600 and supports are at HK$440, followed by HK$420.
As usual, this writeup was broadcast to Clients on 16 Jul 2021 but posted here only on 22 Jul 2021.
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