Goldman sees good options in CMB, Angang, Ping An

SINGAPORE - Goldman Sachs Group Inc is recommending a basket of four Chinese companies whose yuan-denominated shares are more attractively valued than their Hong Kong stocks.

China Merchants Bank Co, Angang Steel Co, China Life Insurance Co and Ping An Insurance (Group) Co are the four companies whose A shares trade at the greatest discounts to their H shares, according to Goldman Sachs analysts led by Timothy Moe.

Their yuan-denominated stocks are more than 10 percent cheaper than the Hong Kong-traded shares, compared with a market-capitalization weighted average premium of 30 percent for all companies with dual listings, according to the analysts.

"We believe these A shares look attractive relative to their respective H shares and suggest long a basket of the four pairs," the analysts wrote in a note on Tuesday.

China shares have plunged the most among the world's largest stock markets this year, with the Shanghai Composite Index declining 9.1 percent. Losses were exacerbated by a 4.8 percent plunge on Monday, the most in almost eight months, following a government crackdown on the property market.

The index lost 0.1 percent to 2978.15 in morning trade on Tuesday. Monday's "unexpectedly large" slump offers investors a chance to add to holdings, even with further "policy headwinds" stemming from the outlook for inflation and interest rates, Goldman Sachs analysts led by Kinger Lau said in a separate note.

They reiterated their end-2010 forecast of 4300 for the CSI 300 Index, which on Monday tumbled 5.4 percent to 3176.42. The Goldman Sachs analysts also said there's "strong fundamental support" at 2900 for the gauge, which translates into a multiple of 16 times estimated earnings.

The CSI 300 is valued at 18.1 times this year's profits, compared with 13 times for the Hang Seng China Enterprises Index, according to data tracked by Bloomberg.

China Merchants Bank, the nation's fifth-largest lender by market value, has lost 14 percent in Shanghai trading this year through Monday, compared with a 0.6 percent gain in its H shares.

Its A shares are trading at 13 times estimated earnings, compared with 14.3 times for the Hong Kong-listed stock.

Angang's stock has also dropped 36 percent in Shenzhen trading, compared with a 21 percent retreat in Hong Kong. Its yuan-denominated shares have a multiple of 14.9 times, compared with 15.4 times for the H shares.

Bloomberg News

(China Daily 04/21/2010 page16)