Remember earnings? It is what spurs investors to buy or sell stocks all over the world. But it sometimes seems the last reason investors warm or cool to the red-chip sector.
Early this summer red chips soared on expectations that market-stimulating policies by Beijing would channel stacks of investor dollars into mainland equities.
However, in the past six weeks the sector lost 30.3 per cent as investors turned and ran, spooked by sabre-rattling across the Taiwan Strait and rumours ranging from the ousting of Premier Zhu Rongji to the devaluation of the Chinese yuan.
While acknowledging that it is difficult to stock-pick in a sector that takes sweeping swings based on sentiment, some analysts point to what they see as compelling individual growth stories.
ABN Amro, for instance, sees red-chip earnings bouncing back next year after reporting mediocre profits for the rest of this year.
It identifies star performers as Tianjin Development Holdings with net profit growth of 40 per cent next year, China Resources Enterprise with 12 per cent, and Beijing Enterprises Holdings with 10 per cent.
