Chinese Utilities Shares Rise on Easing Lockdowns, PMI Data Beat
By Yongchang Chin
Shares of Chinese utilities Tuesday posted some of their most significant gains this month on expectations that the easing of Covid-19 restrictions could further boost China's economic activity, which appears to be on the mend.
Hong Kong-listed China Gas Holdings Ltd. gained as much as 5.1% and was last up 4.2% at 11.48 Hong Kong dollars (US$1.46). Shanghai-listed ENN Natural Gas Co. added 3.7% to 17.84 yuan (US$2.68).
China Resources Power Holdings Co. Ltd. gained 7.0% to HK$15.2, Huaneng Power International Inc. rose 6.8% to HK$3.92 and China Power International Development Ltd. added 8.0% to HK$3.91.
Shares of these utilities have been hurt this year as China's zero-Covid policy crimped demand, with year-to-date losses standing between 25%-40% among the companies.
Sentiment was also lifted by China's May official manufacturing PMI that came in at 49.6, higher than the 48.9 level expected and more than the 47.4 recorded in April.
More cities across the country emerged from lockdowns and officials announced measures to boost the sluggish economy, feeding the demand for electricity and natural gas. Shanghai has allowed manufacturers to resume operations from June 1, while officials have said that Beijing's Covid-19 outbreak is under control, ANZ analysts said in a note.
Citigroup analysts said the outlook for natural gas utilities was now brighter. China's sequential weekly gas use dropped last week but at a smaller pace, a sign that the worst of the lockdowns may be over, they said.
China Resources Gas' sales improved in May, while gas-sales margins in April grew on lower unit gas import costs and more gas being sold to commercial and industrial customers, which have higher sales margins, the analysts said.
Higher gas sales margins may be sustainable given that gas retail prices are expected to remain elevated even during the nonpeak months of April to October, they added.
Write to Yongchang Chin at email@example.com
(END) Dow Jones Newswires
May 31, 2022 01:49 ET (05:49 GMT)Copyright (c) 2022 Dow Jones & Company, Inc.