Hard year seen for H shares as earnings set to disappoint

It is going to be another difficult year for H shares in Hong Kong as last year's results are bound to disappoint, SocGen-Crosby Securities says.

Investment analyst Lan Xue said: 'Most are industrial, so they have been hurt most by the government's tight credit policy. We expect very bad results for 1996.' In its January China overview, SocGen-Crosby said earnings per share would fall by 38.2 per cent on average in 1996 compared with an 18.8 per cent fall a year earlier.

Dividend yield was estimated at 2.6 per cent and the average price-earnings ratio was 17.8 times projected 1996 earnings when the H-share index was at 1,034.9.

The Hang Seng China Enterprises Index, of state-owned companies listed in Hong Kong, closed at 971.35 yesterday.

Among H shares, SocGen-Crosby favours infrastructure plays, notably Harbin Power and Dongfang Electric.

The two companies are the only power generation firms among H shares, so they do not face much competition.

With industrial stocks having suffered so much, overseas investors should be more comfortable with the steady profits infrastructure stocks can provide.