* HSI +0.3 pct, H-shares +0.4 pct, CSI300 +0.3 pct
* CR Power surges, 2012 earnings trigger broker upgrades
* Rally in China IPPs on falling coal prices vulnerable to
By Clement Tan
HONG KONG, March 19 Hong Kong and China shares
rebounded modestly on Tuesday from hefty losses in the previous
session, led by Chinese power producers after positive earnings
reports extended a rally in the sector.
Gains came in weak turnover, however, pointing to lingering
caution over a radical bailout plan for Cyprus which was set to
face a parliamentary vote later in the day, and as investors
await more policy cues from the new Chinese government.
The Hang Seng Index went into the midday trading
break up 0.3 percent, after closing on Monday at its lowest
since Dec. 4. The China Enterprises Index of the leading
Chinese listings in Hong Kong edged up 0.4 percent.
The CSI300 of the top Shanghai and Shenzhen
A-share listings was up 0.3 percent. The Shanghai Composite
Index rose 0.2 percent in midday volume that neared 2013
lows after China's central bank drained 39 billion yuan from the
money markets on Tuesday.
"This rally in Chinese IPP (independent power producers)
share prices on declining coal prices is a theme that has been
played for a long time and a short-term correction could be
due," said Wang Aochao, UOB-Kay Hian's Shanghai-based head of
"They could be vulnerable to a correction in the next beta
rally or to any coal price increases, particularly since some of
the coal producers are trading at pretty attractive valuations
after recent losses," Wang added.
Shares of China Resources Power (CR Power) surged
7.4 percent in Hong Kong to their highest in two weeks after
some brokerages upgraded their target prices for the stock
following positive 2012 earnings.
Analysts at Deutsche Bank raised their target price for CR
Powe by some 14 percent, citing the company's superior execution
and its strongest capacity for organic capacity growth among
CR Power's gains lifted the sector. Huaneng Power
climbed 4.7 percent in Hong Kong and 2.9
percent in Shanghai ahead of its 2012 final earnings report
later in the day.
CR Power has gained nearly 14 percent so far this year, and
is trading at an 8 percent discount to its forward 12-month
earnings multiple, according to Thomson Reuters StarMine. This
compares to the 20 percent discount Huaneng is trading at after
rising 12 percent this year.
In the last 30 days, 6 of 26 analysts have downgraded their
full-year 2012 earnings-per-share estimates for Huaneng by an
average of 3 percent.
Both Chinese power producers have risen even as benchmark
indexes have reversed yearly gains. The Hang Seng Index is now
down 2.2 percent, while the China Enterprises Index has sunk
more than 5 percent in 2013.
China Shenhua Energy, the country's biggest coal
producer, shed 1.1 percent in Hong Kong. It will post 2012
earnings on March 22.
It has slipped 1 percent so far this year and is trading at
a 26 percent discount to its historical median forward 12-month
multiple, according to StarMine.