OCBC plans research push into rival market HK

Flags of the Hong Kong Stock Exchange, China and Hong Kong outside the exchange building. OCBC Bank plans to add coverage of 60 Hong Kong-listed stocks, with 14 to 20 started by the end of the year, according to Ms Carmen Lee, its head of research.
Flags of the Hong Kong Stock Exchange, China and Hong Kong outside the exchange building. OCBC Bank plans to add coverage of 60 Hong Kong-listed stocks, with 14 to 20 started by the end of the year, according to Ms Carmen Lee, its head of research.PHOTO: REUTERS

Singapore's second-largest lender has decided that the best place to expand its research is the country's rival market Hong Kong.

OCBC Bank plans to add coverage of 60 Hong Kong-listed stocks, with 14 to 20 started by the end of the year, according to Ms Carmen Lee, its head of research.

That would supplement the around 75 firms already tracked by Bank of Singapore, OCBC's private banking unit, she said.

OCBC previously invested in mid-cap coverage of Singapore stocks in an attempt to dominate that area of its home market.

However, it was difficult to generate trades because the companies were too small for many clients, she said.

"Hong Kong is now our No. 1 overseas market," Ms Lee said.

"The names are so familiar. Everyone knows about Ping An Insurance Group, China Life Insurance, Tencent Holdings and Baidu. It's very easy to promote Hong Kong ideas."

Her team has already started coverage of China Evergrande Group, Fosun International and China State Construction International Holdings.

The firm initiated coverage on China Evergrande and Fosun this month and China State Construction in September.

Hong Kong's stock market had an average daily turnover of HK$95 billion (S$16.6 billion) in September, compared to less than $1.15 billion in Singapore.

Singapore's stock exchange has accelerated efforts in the past months to increase trading in the country, as its average daily value of shares traded remains at less than half its average level of $2.4 billion in 2007. A penny-stock rout in 2013 shook confidence in the city's markets.

Nevertheless, OCBC remains focused on its core home market, Ms Lee said, adding that she prefers mid-cap property developers in Singapore.

She also said domestic bank shares could continue to rise, even though they have become more expensive.

(OCBC itself, for example, has gained almost 30 per cent this year alone and now trades at 13 times reported earnings, versus its five-year average of 10.5 times.)

The bank's shares rose 0.8 per cent to $11.55 as the benchmark Straits Times Index added 0.3 per cent.

Under Ms Lee, OCBC's research group has taken the unconventional approach of relying more on younger analysts, she said.

Her team consists of six analysts, excluding Ms Lee, with an average age of 30.

The team's two senior analysts and Ms Lee play a role in mentoring the younger ones, she said.

Younger researchers are more willing to take on new ideas, and are also less attached to "core old economy stocks like banking, manufacturing, conglomerates", she said.

The bank is planning to take on two more people for its push into Hong Kong, and ultimately intends to have staff in Hong Kong as well, according to Ms Lee.

The companies the bank is starting to cover are all group efforts, rather than being dominated by a single analyst.

"It's quite unusual," Ms Lee said. "Perhaps we are the only house in the market that does that. Usually most analysts in the past will just want to take 100 per cent ownership."

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A version of this article appeared in the print edition of The Straits Times on October 26, 2017, with the headline 'OCBC plans research push into rival market HK'. Print Edition | Subscribe