Investors in Huaneng cash in gains
Shares in Huaneng Power International fell yesterday, with investors locking in profits on news the power generator has acquired three plants from parent China Huaneng Group.
China's biggest power producer dropped 20 cents or 2.43 per cent to $8.
Analysts said the three power plants in Henan, Shanxi and Shandong provinces were not as attractive as previous acquisitions.
'One of the power plants is making losses,' said Kenny Tang Sing-hing, associate director at Tung Tai Securities. 'Also, additional capital expenditures are required.'
Still, analysts believed investors were using the acquisitions as an excuse to cash in gains. Huaneng has surged about 28 per cent since the beginning of the year.
'This is just a normal price adjustment,' KGI Asia director Ben Kwong Man-bun said. 'Huaneng's valuation is at its historical high.' Mr Kwong recommended a re-entry price of $7.80 for the counter.
On Tuesday, Standard & Poor's Equity Research downgraded its recommendation on Huaneng and Beijing Datang Power Generation from 'accumulate' to 'hold', largely because it thought the companies' shares were overvalued.
But the bearish sentiment is not limited to just the power sector. Analysts say other H-share companies are due for an adjustment. The H-share index has climbed about 25.61 per cent since the beginning of the year.
Alex Tang Yee-yuk, research head at Core Pacific-Yamaichi, said: 'We are now recommending our clients switch from H shares to blue chips and red chips.'
But other research houses such as BOC International remain upbeat on the power generator.
