(Bloomberg) -- Hong Kong’s plunging stock market volumes make the city’s exchange operator an unappealing investment, according to Goldman Sachs Group Inc.

The brokerage cut its recommendation on Hong Kong Exchanges & Clearing Ltd. to sell from neutral, and lowered its price target, in note by analysts including Gurpreet Singh Sahi. Average daily turnover on the Hong Kong bourse in the past two weeks has fallen to the lowest level since the start of the year, according to data compiled by Bloomberg.

Along with dwindling volumes, investors have overestimated the potential impact from new initiatives such as MSCI China index futures and secondary listings by Chinese firms with American depositary receipts, the analysts wrote. They expect second-quarter earnings per share to be 5% below market consensus, according to the note.

HKEX is waiting for regulatory approval to start a futures contact with MSCI Inc. and give international traders another way to hedge their exposure to China listed securities. Alibaba Group Holding Ltd. has filed for a secondary listing, people familiar have said, so far the only firm to do so since rules were changed in 2018.

Goldman has the only sell rating on HKEX among 19 recommendations, according to Bloomberg-compiled data. Goldman’s new price target of HK$238 is 13% below Thursday’s close, and 32% lower than its target in January 2018. The shares last traded up 0.3%, and have gained 21% this year.

To contact the reporter on this story: Benjamin Robertson in Hong Kong at brobertson29@bloomberg.net

To contact the editors responsible for this story: Sam Mamudi at smamudi@bloomberg.net, Richard Frost, Philip Glamann

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