00902 Overview

Market Performance: The HSI closed down 61 points (0.2%) at 25,898, with total market turnover dropping 23% to $254.481 billion.

Automaker Gains: NIO-SW surged 14.1% after reporting its first quarterly profit, while other automakers like GEELY AUTO and XPENG-W also saw significant increases.

Sector Highlights: Intelligent driving and battery stocks experienced notable gains, with CATL rising 9% and WERIDE-W increasing by 7.1%.

Energy and Coal Stocks: Power utilities and coal stocks performed well, with companies like HUANENG POWER and CHINA SHENHUA seeing increases of 3.5% and 4.6%, respectively.

Market Performance: Hong Kong stocks saw a rebound in the morning session, with the HSI rising 212 points (0.84%) to 25,462, while the HSCEI and HSTECH also experienced slight increases. Total turnover reached $164.185 billion.

Financial Sector Gains: Major financial stocks like HSBC and Standard Chartered rose by over 3%, with AIA increasing by nearly 4%. Short selling activity was notable across these stocks, indicating investor interest.

Homebuilders and Conglomerates: Homebuilders SHK PPT, HANG LUNG PPT, and LINK REIT saw gains between 2-2.8%, while conglomerates like CKH HOLDINGS and SWIRE PACIFIC also experienced increases of around 2.5-2.8%.

Energy Sector Speculation: Stocks related to energy transition, such as Weichai Power and Wuxi Lead, advanced significantly, with power equipment stocks like Harbin Electric and Dongfang Electric spiking by 8.9% and 14.3%, respectively.

JPMorgan's Downgrade: JPMorgan has downgraded CHINA RES POWER from Overweight to Neutral and reduced its target price, while maintaining an Underweight rating for HUANENG POWER with a lower target price.

Impact of Price Floor Removal: The removal of the electricity price floor is expected to lead to further declines in on-grid electricity prices for thermal power, potentially compressing profit margins for these companies.

Uncertainty in Tariff Mechanism: Despite the Chinese government's mention of improving the capacity tariff mechanism, there is significant uncertainty regarding its effectiveness and implementation timing.

Negative Earnings Outlook: The earnings outlook for thermal power plants is unfavorable, with market forecasts and dividend predictions facing downside risks.

Challenges in China's Power Industry: HSBC Research indicates that China's power industry will experience weakened growth momentum in the first year of the 15th Five-Year Plan due to declining electricity prices, a slowdown in new installations, and a stabilizing policy environment.

Downgrades and Ratings: HSBC has downgraded HUANENG POWER from Hold to Underweight and CHINA RES POWER from Buy to Hold, reflecting concerns over their earnings forecasts.

Optimism for CHINA LONGYUAN: The report expresses optimism for CHINA LONGYUAN, anticipating that its earnings growth will lead the industry, driven by strong performance in wind resources.

Attractive Dividend Yields: CHINA POWER is projected to have a 5.8% dividend yield in FY26, while CHINA YANGTZE POWER is expected to yield about 3.7%, making them attractive options among their peers.

Citi Research Downgrade: Citi Research downgraded HUANENG POWER's H-/A-shares from Buy to Sell, reducing target prices from $7.2/RMB10 to $4.5/RMB6.25.

Profit Expectations: The broker anticipates that HUANENG POWER's net profit will peak in 2025 and decline in 2026-2027 due to significant tariff reductions and limited decreases in unit coal costs.

Return on Equity: The expected return on equity for 2025 is projected at 9.8%, the highest since 2015, but the company may encounter downside risks.

Short Selling Data: As of January 16, 2026, short selling amounted to $34.66 million with a ratio of 11.524%.

Citi's Research Report: Citi has added HUANENG POWER (00902.HK) to its 30-day downside catalyst watchlist due to anticipated declines in market base electricity prices for 2026, which are expected to fall below market expectations.

Electricity Sales and Tariffs: The report indicates that 63.5% of HUANENG POWER's electricity sales in 1-3Q25 are from Guangdong, Zhejiang, and Jiangsu, where the average market base tariff is projected to decrease by 13.4% YoY in 2026.

Coal Power Capacity Growth: China's coal power plants are expected to see a 65% YoY increase in electricity production capacity, leading to an estimated 8.9% YoY drop in HUANENG POWER's average coal electricity tariff in 2026.

Target Price and Rating: HUANENG POWER has been assigned a target price of HKD7.2 and a Buy rating by Citi, despite the challenges posed by declining tariffs and increased production capacity.