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SCMP Reporter

Investors are focusing on recovery hopes, unfazed by new concerns over Sars

Share prices ticked higher yesterday, led by telecommunications and property stocks, as investors shook off fears of a new Sars outbreak at a Hong Kong hospital.

The Hang Seng Index climbed 68.67 points or 0.62 per cent to end at 11,140.05.

Seven patients at a Hong Kong hospital with a fever and breathing problems were tested for the Sars virus, although preliminary tests indicated they have influenza.

Steven Leung Wai-yuen, a director at UOB-Kay Hian Hong Kong, said investors were unfazed by the Sars concerns and had bought into the story of an economic recovery.

Sentiment was also helped after the United States Federal Reserve decided to leave key interest rates unchanged.

The Fed said it was worried about the weakening US labour market and expected rates would be low for some time.

Low interest rates would help the recovery of the world's largest economy and  Hong Kong's key trading partner.

Telecommunications stocks were in play, led by China Mobile, after Deutsche Bank upgraded the mainland's largest mobile carrier from a 'hold' to a 'buy' with a $26 price target. China Mobile rose 1.67 per cent to $21.35, accounting for most of the gains in the index yesterday.

'Investors should switch out of China Telecom into China Mobile, which has significantly underperformed and is more attractively valued,' Deutsche Bank analyst Fung Ee-lim said.

Although China Mobile's share of the mainland market was expected to drop from 67 per cent last year to a forecast 40 per cent as rivals China Telecom and China Netcom grab customers, it should remain dominant with its lock on high-end mobile users.

PCCW rose 1.53 per cent to $4.975, with sentiment improving towards the debt-ridden operator after the company said it would apply to the Office of the Telecommunications Authority to shed its dominant carrier status. The stock hit an intraday high of $5.10.

Ports-to-telecommunications conglomerate Hutchison rose 1.29 per cent to $58.50 after NTT DoCoMo said it would provide international videophone services to Britain's 3 UK, a unit of Hutchison 3G, easing investor concerns the Japanese company planned to pull out of the mobile-phone venture.

Meanwhile, HSBC Securities lowered its rating on Hutchison from a 'buy' to an 'add', despite increasing its price target from $60 to $65.

The brokerage expected earnings and cash-flow growth from the group's non-telecommunications business to help offset the more cautious view for its 3G operations.

Investors bid up property shares again after buyers continued to snap up flats despite higher prices. On Tuesday, Cheung Kong and Sun Hung Kai Properties said the first 100 units at their joint Pacifica project in Cheung Sha Wan had sold at prices more than 10 per cent higher than neighbouring developments.

The Hang Seng properties sub-index rose 1.73 per cent to end at 14,159.08 points.

Cheung Kong rose 2.01 per cent to $63.25 after Lehman Brothers revised upwards its full-year earnings per share forecast for the property developer to $3 per share.

The brokerage cited a higher than expected margin achieved from its One Beacon Hill project in Kowloon Tong, a substantially expanded treasury portfolio and an unbudgeted disposal gain generated by the recent flotation of Fortune Reit in Singapore.

Sun Hung Kai Properties gained 2.11 per cent to $60.50. The developer plans to open 600 serviced flats at Two International Finance Centre for lease next year. It hopes to generate about $300 million in rental income annually when the project is fully let.

Mainland stocks did not fare as well as their Hong Kong counterparts, with the H-share index dropping  2.15 per cent to 3,130.33 points, mainly led by oil and petroleum stocks.

Oil stocks had been under pressure because of declining crude oil prices prompted by an expected increase in US inventories, Celestial Asia Securities research director Herbert Lau Chung-kwan said.

PetroChina, the mainland's largest oil and gas producer, dropped 2.85 per cent to $2.55. There were also concerns after the central government unveiled a pricing mechanism for its west-east natural gas pipeline in which the indicative average price had been cut by 1.55 per cent - casting additional doubts about earnings for the project.

CNOOC, the mainland's dominant offshore oil producer, fell 2.81 per cent to $13.10 as the stock went ex-dividend. Sinopec, the mainland's second-largest oil producer, dropped 4.49 per cent to $2.125.

KEY FIGURES

Close: 11,140.05 (+68.67)

Turnover: $14.39 bln

Volume: 14.30 bln shares

Day's high:  11,189.91

Day's low: 11,075.64

Advanced: 469

Declined: 439

Unchanged: 374

September futures: 11,135 (+105)

October futures: 11,140 (+107)



Telecoms, property plays rally