* Investors switch focus from weak earnings to upbeat
* Company says expects pick-up in China consumption
* Shares of sector rivals climb
By Donny Kwok
HONG KONG, Nov 30 Shares in Chow Tai Fook
Jewellery Group Ltd, the world's biggest jewellery
retailer by market value, reversed losses to hit a six-month
high on Friday, overcoming pessimism generated by disappointing
The Hong Kong-listed stock fell as much as 5.2 percent in
early trade a day after the firm reported a big drop in
six-month profit, but it later rebounded as investors focused on
an upbeat outlook.
"Investors obviously looked beyond the last six months and
took on a more positive view on China's economy and its retail
sector in the forthcoming future," said Patrick Yiu, a director
at CASH Asset Management, though adding that more evidence was
needed to confirm a positive trend.
Shares in Chow Tai Fook, which competes with Cartier
and Tiffany & Co, climbed as much as 6.8
percent in afternoon trade to HK$11.60, their highest since May.
The shares ended at HK$11.32, up 4.2 percent and outperforming a
0.5 percent gain in the benchmark Hang Seng Index.
"We believe investors have an increasing appetite for Asian
consumer and gaming stocks. With conditions in China improving,
we believe investors will be buying stocks where medium term
fundamentals are attractive," CLSA wrote in a research note.
"CTF (Chow Tai Fook) remains the clear leader in the
attractive Chinese jewellery industry," CLSA said, adding it had
upgraded the stock to underperform from sell.
Goldman Sachs forecast a better 2013 for Chow Tai Fook, with
signs of accelerating growth as the jeweller's same store sales
growth rose in November.
Smaller rival Luk Fook Holdings (International) Ltd
, which jumped more than 10 percent on Thursday after
posting better than expected first half earnings, also erased
early losses to end 0.4 percent higher on Friday.
Emperor Jewellery & Watch rose 3.3 percent, while
Chow Sang Sang and Tse Sui Luen Jewellery
"Stocks like Chow Tai Fook and Luk Fook are still worth a
bet given that there are signs of a pick-up in consumer spending
in China," said Alex Wong, a director at Ample Finance Group,
which has funds that invest in Chow Tai Fook and Luk Fook.
Analysts said Luk Fook was benefiting from rising gold
prices and relatively lower hedging costs because it hedged only
10-15 percent of gold inventories, lower than Chow Tai Fook's
revised 70 percent.
Chow Tai Fook's hedging costs contributed to its six-month
net profit falling by a third year-on-year to HK$1.82 billion,
below analysts' expectations. The company said it will target
e-commerce to boost growth, and is upbeat about a near-term rise
in Chinese luxury spending.