Project's success gives shot in arm to aerospace shares

Chinese aerospace shares gained considerable ground on Friday as the nation's Shenzhou IX manned spacecraft completed docking and returned to Earth as planned.

The ambitious space mission has been seen as presenting potentially golden buying opportunities for investors, in view of the strategic priority now being placed by the government on the aerospace sector, according to experts.

Shanghai-listed Xi'an Aero-engine Corp, the country's manufacturing and distribution base for aero engine production, gained 1.96 percent to close at 13.02 yuan ($2.04), marking the latest surge in a week that saw an overall combined market loss of 5.68 percent.

The company's revenues from aero engines rose by 15.5 percent in 2011, its annual report showed, and that will be sustained, buoyed by the explosive military aero engine market that is expected to hit $24 billion in scale over the next decade, said Wang Tianyi from Orient Securities Co.

"The company will benefit from the government's ongoing input in carrier-based aircraft transporters and helicopters," he said.

Guizhou Space Appliance Co, the listed company of China Aerospace Science and Industry Corp, advanced 4.15 percent on the final trading day of the week. It reached its peak of the day at 15.02 yuan around 10:30 am, minutes after the successful landing was confirmed.

A key supplier of high-end relay, connector and cable components, Guizhou serves as the national defense enterprise technology center and its products are widely sold to the aerospace, shipping and telecommunications industries.

The company is likely to enjoy annual growth of 30 percent from 2012 to 2015, as current policies to bolster aerospace development will also unlock the full potential for military sales of its electronic components, according to Zhang Yuande, an aerospace specialist at Founder Securities Co.

The Shenzhen bourse also saw moderate growth of Aerospace Hi-Tech Holding Group Co, the sole Chinese company that develops solid rocket propulsion technology. It added 0.71 percent to conclude at 11.34 yuan, offsetting a 2.3 percent weekly decline.

The market was also bullish about Aerospace Hi-Tech's prospects of gaining its planned third round of funding, widely anticipated to take place in the first half of 2013, Yao Kai from Aerospace Securities Co wrote in a recent research note.

Liu Ying, an analyst at Huatai Securities Co Ltd, said that the Shenzhou launch, the final one before the space station completes construction, presented precious trading opportunities in the short term for shares in the aerospace sector.

But Wang from Orient Securities forecast a drop in aerospace shares in coming weeks similar to periods following previous launches.

China has allocated 670 billion yuan to its national defense budget this year, up 11.2 percent year-on-year.

During the 12th Five-Year Plan (2011-15), the country set out to build a 60-ton space station and develop a cargo spaceship to transport supplies.

The policy incentives have laid a solid foundation for military enterprises to grow in the long run, said Huang Hai, a professor at Beihang University in Beijing, which specializes in the study of aeronautics and astronautics.

The successful launch has become a "tipping point" for the overall gloomy capital market, added Wang Yaoji, deputy director of the Securities Research Institute of Fudan University.

He said there are rosy prospects for the national defense industry.

"The profitability of the aerospace sector is less exposed to the economic downward spiral, making it an ideal investment target under uncertain market conditions," he said.

hewei@chinadaily.com.cn