Portfolio | Bulls and bears battle over direction of Hong Kong Exchanges and Clearing stock

To buy, or not to buy? Can you blame investors when the experts themselves are so divided?

The target price for Hong Kong Exchanges and Clearing (HKEx) stock now ranges from HK$155 to HK$400, depending on which expert you are listening to. The conflicting estimates come on heels of a searing rally that has seen the stock jump to as high as HK$305.6 in 52 weeks. It closed at HK$275.8 on Thursday.

In April alone, it rose almost 70 per cent, the kind of swing one would associate more with penny stocks than with a blue chip. The reason for the spike was the sudden jump in average daily turnover after Beijing allowed mainland mutual funds to invest in Hong Kong. As a result, the local exchange’s daily turnover shot up to HK$200 billion on average. The bourse set a record when it hit HK$293.91 billion on April 9 – triple the normal turnover level.

The contrasting views among analysts boil down to a difference of opinion on whether high turnover is here to stay. About 70 per cent of HKEx’s income is linked to its turnover, and about 15 per cent to listing fees.

CLSA has a “sell” rating on HKEx and assigns it a target price of HK$155 – a downside risk of 44 per cent. This despite HKEx on Wednesday announcing its first-quarter profit had risen 34 per cent year in year to HK$1.58 billion.