Plan change hurts red chip
Shares of China Resources Enterprise yesterday plunged 10.05 per cent to HK$7.60 after the red-chip conglomerate aborted plans to buy a mainland logistic business from its parent.
'Investors usually buy red chips or H shares on their new growth concepts . . . buying momentum was lost when the company decided to scale back,' one analyst said.
On Tuesday, China Resources told analysts it would not acquire the logistics business of parent China Resources (Holdings) because of the sector's uncertain earnings outlook.
Analysts warned that the decision would slow the company's plan to become one of Asia's largest commodities distribution groups.
The company had hoped the news would be offset by details of its $10 billion capital expenditure plan to enlarge its existing businesses in the next three to five years. However, analysts said they were looking for more positives in the short term.
The company also said it would move its headquarters to the mainland, and enlarge its earnings base there.
At present, 80 per cent of its income comes from Hong Kong operations including building, supermarkets and food distribution. It hopes to strike more balance between its Hong Kong and mainland revenues.