Anhui Conch Cement May Add to Fourfold Share Gain

Anhui Conch Cement May Add to Fourfold Share Gain
Published: 31 October 2007

Investors betting against Anhui Conch Cement Co. after a more than fourfold increase in the past year may miss out on even more gains as projects such as the Three Gorges Dam and the 2008 Olympics fuel demand, allowing the company to raise prices.

During the week of Oct. 12, when China’s biggest cement company advanced 30 percent, the value of its shares sold short almost tripled, according to data compiled by Bloomberg.

Anhui Conch will climb an additional 53 percent, to HK$120, in the next 12 months, said Credit Suisse analyst Trina Chen, who doubled her previous estimate on Oct. 10. Investors are snapping up the shares after China accelerated cement production at the fastest pace in at least 11 years. Anhui Conch’s size and the quality of its cement landed it atop a list of 60 cement makers chosen by the government for preferential treatment amid an industry consolidation.

``The most attractive sector in China basic materials is still cement,’’ Chen wrote in a report. She has an ``outperform’’ rating on the stock. Anhui Conch short sellers may join others who might have misjudged whether Hong Kong-traded shares would fall.

In the week ended Oct. 26, an average 5.4 million shares of China Mobile Ltd. were sold short each day, 64 percent more than in the first week of the year. The value of shares sold short rose 39 percent in that period. So far this year, shares of the world’s largest mobile-phone operator by users are up 135 percent.

Investors buying Anhui Conch shares now will catch the industry in an upswing as cement prices come out of a trough caused in 2005 by oversupply, said Fung Kwok On, who helps oversee funds at Nikko Asset Management Co. in Tokyo including 100 billion yen ($872 million) of yuan-denominated A shares.