Buyers grab China plays
JON OGDEN
China plays yesterday closed the first quarter with a bang while blue chips went out with a whimper. Investors piled into H shares and red chips seeking a sanctuary from the punishing battle between interest-rate cuts and earnings downgrades being fought out on the world's markets.
H shares roared up 4.15 per cent while red chips firmed 2.24 per cent.
Meanwhile, after spending much of the afternoon under water, the Hang Seng Index rallied in the last half hour of trading to finish up 82.75 points, or 0.65 per cent, at 12,760.64.
"If you were just a blue-chip player, there was nothing going on in the market," said Ryan Fong Yen-hwung, vice-president for institutional sales at e2-Capital Securities.
"People were looking to move money into more stable and defensive plays. People can't hold that much cash, they have to put the money to work.
"I think there is going to be some more follow-through given the uncertainty in the United States and Hong Kong blue chips."
Some money going into H shares was from China on the story of the likely convergence with mainland-traded A and B shares, Mr Fong said.
After being allowed to trade B shares legally for the first time some mainland investors were taking profits and moving the money into H shares, said Alex Tang Yee-yuk, the head of research at Core Pacific-Yamaichi Securities.
"I think [China plays] are going to be the main theme in coming months, especially ahead of China's entry into the [World Trade Organisation]," Mr Tang said. "This group of counters is definitely on an upcycle."
Minibus maker Brilliance China soared 12.34 per cent to HK$2.275, helped by the signing of a technical support agreement with BMW, a boost to plans to diversify into producing cars.
Salomon Smith Barney maintained its buy rating on the stock with a $2.60 price target. That would still leave Brilliance trading at only seven times this year's forecast earnings.
Pacific Century CyberWorks, the Internet vehicle which last year pulled off a leveraged buyout of telecommunications incumbent Cable & Wireless HKT, had another harrowing day after Wednesday's announcement of a $6.9 billion loss.
"The market is concerned about the huge debt problem. There are rumours they may have a placement or a rights issue," Mr Fong said.
CyberWorks fell a further 5.38 per cent to $3.075.
"We put a fair value of $4 on it but apparently investors don't believe it. It is to do with sentiment, not so much as to do with valuation," Mr Tang said.
Investors "are extremely disappointed at last year's earnings. They want to trim down their exposure and walk away".
Having cleaned up their portfolios before yesterday's book closing, fund managers would be prepared to set up new positions next week, said David Williamson, a sales director at China Everbright Securities.
Email Jon Ogden at jonogden@scmp.com
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