PetroChina lifts Hong Kong stocks to biggest two-week gain on gas price increase
China’s largest producer of oil and gas contributed to almost 13 per cent of the gain on the Hang Seng Index
Hong Kong’s stocks rose the most in two weeks on Monday as PetroChina rallied after the mainland Chinese government announced that it will raise gas prices for residential use, while beer brewers gained on the prospect of rising demand for the beverage before the Fifa World Cup.
The Hang Seng Index gained 204.22 points, or 0.7 per cent, to 30,792.26 at the close on Monday. The Hang Seng China Enterprises Index, also known as the H-share gauge, added 0.6 per cent. The mainland’s benchmark Shanghai Composite Index slipped for a fourth day.
PetroChina, the nation’s largest producer of both oil and gas, alone contributed to almost 13 per cent of the gain on the Hang Seng Index after industry regulator National Development and Reform Commission announced on Friday to reform the pricing mechanism for residential gas prices so that they could rise to narrow a 20 per cent gap with non-residential prices. The announcement also made the stock resistant to a recent rout in crude oil after major nations producing the fuel were mulling over a plan to increase output.
“This directly benefits the upstream resource companies such as PetroChina,” said Liu Xiaoning, an analyst at Shenwan Hongyuan Group in Shanghai. “The move is intended to encourage market-based trading and will help fair pricing of gas for residential and non-residential use in both upstream and downstream.”
PetroChina jumped 6.5 per cent to HK$6.44, with volumes surging to almost three times its 30-day average. Sanford Bernstein lifted its target share on the stock by 18 per cent to HK$7.30. The hike would raise the company’s average gas selling prices and cut losses from gas imports that have dragged down its overall profit by tens of billions of yuan annually for years, Neil Beveridge, an analyst at the American brokerage said in a note on Monday.
On the flip side, the price increase sent shares of Chinese gas distributors plunging on concern their profit margins may be eroded. They may be able to only pass on 80 per cent of the cost rises to end users, according to Dennis Ip, head of Hong Kong and China utilities research at Daiwa Capital Markets.
China Resources Gas Group sank 2.7 per cent to HK$29.10 and ENN Energy Holdings closed 0.3 per cent lower at HK$78.
Tsingtao Brewery added 4.6 per cent to HK$51 and China Resources Beer Holdings advanced 5.9 per cent to HK$37.50. Investors should watch out for investment opportunities from beer and snack makers as the World Cup, which will be played in Russia from June 14 to July 15, draws closer, according to Sealand Securities.
China Oilfield Services lost 2.2 per cent to HK$8.08 and CNOOC shed 0.9 per cent to HK$13. Crude oil slid for a fifth day in New York to recently trade at US$66.72 a barrel, as Russia, Saudi Arabia and the United Arab Emirates discussed plans to ease production cuts in the second half.
In trading on the mainland markets, the Shanghai Composite retreated 6.22 points, or 0.2 per cent, to 3,135.08. The CSI 300 Index of large-caps rose 0.4 per cent and the ChiNext gauge of smaller companies slid 0.4 per cent.
Oil-related stocks led the decline in Shanghai. China Oilfield slumped 4.6 per cent to 10.57 yuan in Shanghai and China Petroleum Engineering tumbled 5.3 per cent to 4.65 yuan. Offshore Oil Engineering dropped 3.7 per cent to 6.06 yuan.
Anhui Gujing Distillery led the charge among Chinese fiery liquor producers, as overseas investors increased buying of Chinese companies that are less represented in offshore markets before mainland equities’ inclusion into MSCI’s global gauges on June 1. The stock jumped by the 10 per cent daily limit to 83.57 yuan.
Beijing Shunxin Agriculture, which derives more than half of its revenues from white spirits, advanced 7.8 per cent to 33.95 yuan and Jiangsu Yanghe Brewery Joint-Stock climbed 5.7 per cent to 136.35 yuan.
Hangzhou Hikvision Digital Technology, China’s biggest maker of surveillance cameras, fell as much as 4.8 per cent on throughout the day before clawing back all the loss to close 0.2 per cent higher at 38.66 yuan. The company rebuffed a move by the House of Representatives to bar the US government from buying its products, saying it has no factual basis.