Investors betting on firms that could win rebuilding contracts
By Goh Eng Yeow
INVESTORS have started buying up stocks that are likely to win extra business in the massive reconstruction effort that is expected to follow the deadly Sichuan earthquake.
Shares of steel, aluminium and building-materials firms listed in Shanghai and Hong Kong shot up sharply yesterday on expectations that these businesses are in line for lucrative reconstruction contracts.
In Singapore, traders bought big on financial instruments called covered warrants linked to Hong Kong-listed China Railway Construction, one of the mainland’s biggest construction firms.
These warrants give investors an option to buy into China Railway Construction until September. If the company wins a big Chinese government contract, these investors stand to gain.
As fresh details of the devastation emerged, traders began to realise the extent of likely rebuilding efforts - especially given China’s strong position to carry out such work.
‘China has US$1.6 trillion (S$2.2 trillion) in foreign reserves. It has ample financial resources to rebuild areas worst hit by the quake,’ said a remisier in Singapore yesterday.
In Shanghai, big gainers included Aluminium Corp of China, which jumped 6.4 per cent, and Yunnan Copper Industry, which surged 10 per cent. Cement firms such as Huaxin Cement and Fujian Cement gained 10 per cent each.
Similar strong buying swept the Hong Kong bourse as investors sought out mainland stocks listed there which might benefit from the reconstruction efforts.
Anhui Couch Cement Company was up 3 per cent and Maanshan Iron & Steel gained 4 per cent, while China Construction and Jiangxi Copper each rose 1 per cent.
Mr Simon Yung, BNP Paribas’ head of retail listed products sales for Singapore and Hong Kong, said mainland steel counters would be the first stocks to reap the benefits of any reconstruction efforts as the earthquake will exacerbate an already acute shortage of steel in China.
Source : Straits Times - 15 May 2008
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