6881 HK...The Best Way To Play A China A-Share Recovery?

In a report published Friday, BNP Paribas analyst Judy Zhang upgraded the rating on

(HKG: 6881,

from Hold to Buy, while raising the price target from HKD11 to HKD 13.90. China Galaxy Securities' share price has declined by 27 percent from its peak on April 13 on investor concerns about changes in monetary policy and crackdowns on shadow leverage financing. "We think the current valuation is attractive after this correction as government support for the A-share market has become clearer following recent target RRR, interest rate and transaction cost cuts. We expect more supportive measures to be introduced if the A-share market continues to correct, which would lead to a rebound," analyst Judy Zhang mentioned. "We believe CGS is the most geared among our coverage to an A-share market rebound, with the highest revenue contribution from brokerage business," Zhang added. The earnings estimates for FY15-17 have been raised by 28-66 percent to reflect a strong A-share market performance and higher ADT assumptions. Key risks to Galaxy Securities' future performance include a faster than expected decline in commission rates and no pick up in the economic growth momentum in the third quarter.