JPMorgan likes Chinese port, insurance stocks http://today.reuters.com/stocks/QuoteCompanyNewsArticle.aspx?view=CN&storyID=2006-07-31T055558Z_01_HKG234461_RTRIDST_0_FINANCIAL-CHINA-JPMORGAN.XML&rpc=66
Mon Jul 31, 2006
HONG KONG, July 31 (Reuters) - JPMorgan (JPM.N: Quote, Profile, Research) favours Chinese port operators, insurers, refiners and coal and aluminium companies during a time when there are short-term concerns hanging over mainland stocks, the chairman of its China equities unit said on Monday. Beijing has been adding tightening measures, such as higher interest rates to curb lending, to prevent China's booming economy from overheating, and some investors are worried about how that will affect GDP growth, said Jing Ulrich.
Global investors are still bullish on Chinese stocks, which have been top performers this year, said Ulrich, who recently met about 500 investors during a global roadshow.
"A shares have been the best performing market in the world," she said, estimating that the market will have up to $10 billion in new listings by the end of this year.
China's benchmark Shanghai Composite Index <.SSEC> is up nearly 40 percent this year, compared with a 14 percent increase in Hong Kong's Hang Seng Index <.HSI>.
"Confidence in the domestic A-share market is being rebuilt," Ulrich said, noting that corporate and household savings in China now topped $4 trillion. "There's a lot of pent-up demand for A-share IPOs."
Industrial & Commercial Bank of China [ICBC.UL], the country's top lender, may raise up to $21 billion in a dual stock listing in October, with up to one-third of that being raised in Shanghai. Bank of China (3988.HK: Quote, Profile, Research) (601988.SS: Quote, Profile, Research) raised $2.5 billion in Shanghai in early July.
Ulrich also said that China's Qualified Foreign Institutional Investor (QFII) scheme, which has allocated $7.2 billion for overseas institutions to invest in mainland securities, would grow to $10 billion by the end of 2006.
One sector that may be avoided for the short term was property, where Beijing has been very active trying to keep down soaring real estate prices in cities like Beijing and Shanghai, she said.
Investors would be wise to put their money in port companies, which have benefited from China's strong international trade. Another top pick is insurance companies, which will benefit from higher interest rates.
China Life Insurance (LFC.N: Quote, Profile, Research) (2628.HK: Quote, Profile, Research), Ping An Insurance (2318.HK: Quote, Profile, Research) and PICC Property & Casualty (2328.HK: Quote, Profile, Research) are all listed overseas.
Coal miners and aluminium companies should also benefit from consolidation trends in their overcrowded sectors, Ulrich said.
"Both sectors have been very fragmented, with too many smaller players," she said, without naming particular companies. "They stand to benefit from the ongoing trend of building national champions."
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