Tencent no match for ‘China’s DuPont’ as stock’s 333 per cent gain fires up Shenzhen Stock Connect

Chemical producer has state approval even as technology giants come under regulatory fire

Viewed as China’s version of DuPont or BASF, Dongyue outshines Tencent by attracting big buying interest through Shenzhen Stock Connect

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Money managers at BlackRock, Vanguard and Dimensional Funds are among Dongyue’s foreign investors. Photo: Handout

Published: 7:30am, 6 Sep 2021Updated: 9:14am, 6 Sep 2021

Forget about Chinese technology champions for a moment, whose stocks have plummeted 20 per cent this year amid unforgiving regulatory crackdowns. Consider Dongyue Group, which has rallied 333 per cent and emerged as an investor favourite on the Stock Connect with Shenzhen.

The chemical producer has what investors covet when building a winning portfolio: strong earnings momentum tied to the electric vehicle boom, positive fund flows and a seal of approval from the highest state authorities, which regard the firm as China’s equivalent to industry giants DuPont and BASF.

Dongyue last week raised HK$3.3 billion (US$426 million) from a stock placement to expand its capacity to make fluoropolymer, which is used in weather resistant coating materials, adhesives for lithium batteries and photovoltaic backplanes. The profit at the Shandong-based firm surged 49 per cent in its latest half-year report.

“Most of Dongyue’s projects will start production in the second half of this year or next year,” said Huang Wentao, an analyst at CSC Financial. “That will broaden its product range, laying a solid foundation for its growth.”

A Dongyue production facility in China’s eastern Shandong province. Photo: Handout

While only a handful of analysts are tracking the stock, Dongyue has become a magnet for investors since the end of June, attracting at least HK$5.8 billion in net buying from mainland China based investors buying Hong Kong shares, according to the Shenzhen Stock Connect southbound trading. It has upstaged Tencent Holdings on occasion as the most active stock. Tencent, whose shares have dropped 13.5 per cent this year, suffered HK$12.7 billion in net selling over the same period.