HSI tip: PetroChina, Shenhua
In a move to reflect the importance of mainland companies in Hong Kong's capital market, oil giant PetroChina (0857) and coal producer China Shenhua (1088) are widely expected to become Hang Seng Index constituent stocks on December 10 following the HSI's quarterly review next month.
PetroChina and Shenhua would fill two of the 10 vacancies on the index, which is capped at 50 stocks.
ICEA Securities Asia said on Friday that property developer China Overseas Land (0686) and Aluminum Corp of China (2600), or Chalco, both stand an excellent chance of taking seats after the November review.
"Chalco meets the market capitalization size and liquidity criteria for inclusion, as its share price has doubled since its A-share listing on April 30," said ICEA analyst Ernie Hou.
As for China Overseas, Hou said since the transition of the benchmark index to a free- float weighted index, there should be no excuse for rejection of the mainland developer, which has triple the market cap of PCCW (0008), one of the existing constituents.
As for the remaining six spots, Hou tips Country Garden (2007), China Communications (1800), China Merchants Bank (3968), China Telecom (0728), Nine Dragons Paper (2689) and China Coal Energy (1898), which will all become eligible by the end of next year.
"It is no surprise to have more Chinese stocks being admitted, for their size and businesses have outweighed the local peers," said Marco Mak, head of research at Taifook Securities.
HSI Services, which compiles the benchmark index, completed its reshuffle last month by capping large stocks such as HSBC Holdings (0005) and China Mobile (0941) at 15 percent market float in order to include more H shares, reflecting the growing prominence of Chinese firms.
After adding the 10 mainland-linked stocks, Hou said the HSI would develop more of the China character favored by global investors.
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