BlackRock Wins Regulatory Approval to Start a Mutual-Fund Business in China; Target Price $630

BlackRock, the world’s largest investment management firm, received an approval to set up a wholly-owned mutual fund unit in the world’s second-largest economy, making it the one of the first global asset management firm to win regulatory approval from the China Securities Regulatory Commission.

BlackRock got the green light late this month to start a wholly-owned subsidiary in Shanghai, the China Securities Regulatory Commission said on Friday.

The approval would extend the investment management firm’s spectra in the Chinese asset management market, where it already operates as a mutual fund venture with Bank of China and is in the process of setting up a management venture with China Construction Bank and Temasek, Reuters reported.

Last month, BlackRock reported a 20% surge in profit in Q2, largely driven by a boost in fixed income and continued momentum in cash management.

BlackRock shares closed 1.02% higher at $601 on Friday, the stock is up about 19% so far this year.

BlackRock stock forecast

Twelve analysts forecast the average price in 12 months at $632.27 with a high forecast of $685.00 and a low forecast of $566.00. The average price target represents a 5.19% increase from the last price of $601.06. From those 12 analysts, ten rated “Buy”, two rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a target price of $652 with a high of $985 under a bull-case scenario and $320 under the worst-case scenario. The brokerage currently has an “overweight” rating on the asset manager’s stock. Deutsche Bank also raised their target price to $568 from $566.

Other equity analysts also recently updated their stock outlook. BMO Capital Markets raised their target price on BlackRock to $620 from $560.00 and gave the company a “market perform” rating. Wells Fargo & Co raised their target price to $615 from $605 and gave the company an “overweight” rating. At last, Argus increased their price objective to $640 from $530 and gave the company a “buy” rating.

We think it is good to buy at the current level and target $630 as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst view

“BlackRock seems well-poised to capitalize on opportunistic acquisitions to enhance financial performance. Also, its efforts to gain market share in the active equity business will aid profitability,” noted equity analysts at Zacks Research.

“(But) Mounting expenses (mainly owing to higher general and administration costs) are likely to hurt BlackRock’s bottom line to an extent. High dependence on overseas revenues makes us apprehensive.”

Upside and Downside risks

Upside: 1) Growth in highly scalable iShares franchise driving margin expansion and strong EPS growth. 2) Further growth in tech & high fee products such as alts, active equities, and multi-asset – highlighted by Morgan Stanley.

Downside: 1) Market share loss in ETFs; lack of positive op leverage in declining markets. 2) Worse than expected base fee pressure through pricing initiatives or mix shift. 3) Greater regulatory scrutiny; liquidity challenges in products.

This article was originally posted on FX Empire


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