China’s leaders have a huge dilemma coming this winter: Keep their citizens warm or clean. A huge and lingering dependence on coal-fired heat means that it’s going to be hard to do both at the same time. Times are indeed tough. Only a couple of weeks ago pollution levels in the northern city of Harbin reached absurd proportions on a particularly bad day. As winter sets in and freezing conditions take hold of the north local governments will start turning on heating facilities that gobble up coal with a voracious appetite. Coupled with winter conditions, smog is likely to be a regular hazard over the next few months. So what to do? The central government has been pushing for greater use of natural gas, which is much cleaner than coal. Many coastal cities have been encouraging their residents to switch supplies. ENN Energy Holdings (2688.HKG) is one of the biggest city gas suppliers in China “and will benefit from more gas volumes,” David Li, investment manager at London-based Ampax that has about US$3 billion under management, told China Economic Review from Hong Kong. The company has a big gas natural gas distribution network and has also moved into providing LNG for public and long-range buses. The company has a “stable business model with good long-term volume and will pick up opportunities,” noted Li.
No reason to libel Zoomlion
Covering heavy equipment makers such as Zoomlion (1157.HKG, 000157.SHE) can be depressing. It can even land you in jail if you’re a Chinese business reporter. The company, which is partially state-owned, has been attacked four times this year with accusations that it inflates its mainland sales. Trading of the stock has been stopped twice. The latest case to break was the arrest of News Express reporter Chen Yongzhou, who confessed after a lengthy detention to cooking up negative coverage about the company in exchange for kickbacks. That’s important to investors. The stock climbed 9.6% after Chen’s avowal but is still likely feeling the effects of the initial allegations. However, anyone with stock in Zoomlion should really be looking at the expectation-defying drop in sales at the company. Sales were down 12% in the third quarter and profits tanked 33% year-on-year. The results “surprised even the bears,” Vik Chopra, an analyst at Sun Hung Kai Financial, wrote in a report on Thursday. Little has changed in the past six months in the construction sector that would boost the company’s sales of concrete machinery. With conditions such as these, anyone who would pay for negative coverage of the company has renminbi to burn. By the way, who was behind the bribery? Hunan police have marched Chen around like a Serbian war criminal yet they’ve neglected to say who put up the money. Perhaps we shouldn’t ask too many questions either.
Pick the right route
China’s roads are getting busier by the day as citizens long accustomed to bicycles and super crowded public transport networks lean the joys of driving. When they get a chance, the Zhang’s pack their bags and drive out to new destinations across China, reveling in their newfound freedom. They are being joined on the road by more trucks and coaches. Total vehicle sales this year are expected top 20 million units. That’s great news for automakers and gas station operators; even better for the owners of the nation’s stretch of toll roads. These companies are typically given long-term licenses to build and operate roads connecting key parts of the country, taking tolls from passing motorists. An increase in motor traffic will push up their revenues. Anhui Expressway (995.HKG) saw income from tariffs rise in the third quarter, according to Barclays analysts, as did Shenzhen Expressway (548.HKG) and Sichuan Expressway (107.HKG). But it’s not as simple as that. While Shenzhen Expressway saw revenue in July-September rise on major routes that benefited from new connecting roads and upgrades, a new motorway with a shorter distance between Chengdu and Chongqing will divert traffic from Sichuan Expressway’s key Chengyu route, the analysts noted. Some roads, it seems, just don’t lead anywhere.
Travel website Qunar Cayman Islands will look to raise up to US$155 million with an IPO today on the NYSE. It’s one of the biggest Chinese listings in New York in two years. China’s version of craigslist, 58.com, listed on Thursday but at the time of reporting, results were not in yet. Muddy Water’s hit on NQ Mobile last week could temper an otherwise enthusiastic response to Chinese companies on global markets recently. Bank of Chongqing lists in Hong Kong next Wednesday at HK$6.00 per share, about the mid-point on its marketing range.
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