HONG KONG: Fujian-based companies listed in Hong Kong were thrust onto centre stage yesterday as investors frenetically snapped up their shares after the central government gave the green light for the development of a new economic zone that centers on the province.

Share prices in Fujian-based firms surged on hopes that they will benefit from potentially-robust economic activities in the region when development works kick off, analysts said.

The State Council, or the cabinet, said on Monday that it had adopted a plan to support the development of a new economic zone on the western side of the Taiwan Straits, which will consist of the whole Fujian province, the southern part of Zhejiang province, the northern part of Guangdong province and parts of Jiangxi province.

The new economic zone when fully developed could be comparable in scale with the Pearl River Delta and the Yangtze River Delta regions, the two leading economic powerhouses on the mainland, analysts said.

Fujian Holdings Ltd (0181.HK), a property and hotel investment holding company, jumped 38 percent to close at HK$0.69 while port operator Xiamen International Port Co LTD surged 21.9 percent to HK$1.56 on hopes of robust business growth in the future.

Property developer and toll road operator Min Xin Holdings Ltd also gained strongly, advancing 12.8 percent to HK$3.36.

Fubon Bank (Hong Kong) Ltd, which owns a 20 percent stake in Xiamen City Commercial Bank, rose 10 percent to HK$3.26.

The new economic zone could be the biggest bright spot in the mainland's regional economic development for a relatively-long period of time, BOC International said in a research report.

Construction of infrastructure and logistic facilities, development of financial service sector and urbanization in the region will be accelerated, benefiting companies that operate there, the report said.

However, BOC International warned that the sharp gains in share prices have fully reflected the expected benefits.

Matthew Kwok, research head at Tanrich Securities Ltd, also cautions investors against chasing the shares aggressively.

"The development of the new economic zone is still in the conceptual phase. The lack of details gives investors room to make their wild imagination," he said.

"It is not an easy job to guess when this rally in share prices will end. We need more details to estimate which firms will benefit most," he added.

Cho Fook-tat, an analyst at Taifook Securities Ltd, agreed with Kwok, saying that it could be a long time before those companies actually benefit from the development of the economic zone.

"The rally in these share prices will be short-lived. Corrections could come soon after the good news is discounted," he said.

(HK Edition 05/06/2009 page16)