CLSA Says It's Long on Citic Pacific, PCCW, and Fountain Set; Short on Swire, SmarTone, Texwinca
Feb 06, 2002 - 18:19:08 HKT
Quamnet News Service
CLSA Emerging Markets said it is going long on Citic Pacific Ltd. (0267) but shorting Swire Pacific Ltd. (0019) as the former has underperformed Swire by 23 percent in the past three months and the trend is about to turn around.
The house focused its investment revision in three sectors - conglomerates, telecoms and garments.
CLSA's approach was to revise individual ratings on sector stocks depending on relative performance, seeking to identify pricing inefficiencies between comparable companies. The house believes better trading opportunities can be identified in cases where there are wide share price fluctuations, and thus focused its analysis on pairs where one outperformed its counterpart by more than 20 percent in three months.
For telecoms, the house has picked Pacific Century CyberWorks Ltd. (0008) and underweighted SmarTone Telecommunications Holdings Ltd. (0315). SmarTone has outperformed PCCW by 25 percent in the past three months. Having risen 9.7 percent in December alone, SmarTone has a 32 percent downside. However, PCCW, having fallen 16.5 percent last month, offers 56 percent upside to the house's target of HK$3.
For textile and garment plays, the house went long on Fountain Set (0420) but short on Texwinca Holdings (0321). Over the past three months, Fountain Set has outperformed Texwinca by 22 percent. With its gearing now reduced to 57 percent from 145 percent in 1995, Fountain Set should remain a gainer in the low interest rate environment. Texwinca, however, will receive less interest income this year as it is in a net cash position.
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