[ET Net News Agency, 9 October 2017] Morgan Stanley lifted its target price for China
Merchants Securities (CMSC)(06099) to HK$15.22 from HK$12.7, and maintained its
"equal-weight" rating.
It said that CMSC has early positioning in institutional business, especially prime
brokerage. Its asset management business could also benefit from the synergy between
multiple platforms. Its relatively weak returns from proprietary trading and net interest
income should improve amid warmer market sentiment.
Morgan said higher turnover in 2018 should lead to stronger earnings growth for brokers.
Despite the rise in the Shanghai Composite index in 1H, average daily turnover (ADT) was
lower than we anticipated. It expects a gradual increase in retail fund flows to the
A-share market in the next 2-3 years, considering the fast growth of household financial
assets, combined with the lower supply of higher-yield, non-standardized credit-related
investment products.
Separately, the research house believes mutual funds and private funds are likely to
increase their allocations to equity markets, contrary to the trend so far this year,
which has seen a lower portion of assets under management (AUM) invested in equity. As a
result, Morgan increased its 2018 ADT forecast to Rmb670bn from Rmb550bn. (KL)