02688 Overview

Brent Oil Price Fluctuation: Brent oil prices dropped after reaching USD 117 per barrel, influenced by President Trump's comments on the potential end of the Iran war.

Sector Risk-Reward Profile: The crisis in the Hormuz Strait has altered the risk-reward dynamics in the oil and gas sector, with expectations of sustained high prices.

Daiwa's Sector Picks: Daiwa recommends ENN ENERGY and NEWAY as top picks in the oil and gas sector despite the current volatility.

Cautious Outlook on Gas Stocks: Daiwa expresses caution regarding city gas stocks due to rising natural gas prices, predicting that companies with high liquefied natural gas exposure may face significant losses.

Impact of Middle East Situation: JPMorgan reports that disruptions in the Middle East could affect over 20% of the global liquefied natural gas (LNG) supply, leading to increased price volatility and challenging the expectation of a supply surplus into the 2030s.

Short-term Effects on China: The short-term impact on China's gas utilities is expected to be limited, as spot LNG constitutes only about 10% of their total gas resources, which mitigates immediate procurement cost increases.

Cautious Outlook on Gas Sector: If oil and gas prices remain high, procurement costs for pipeline gas and LNG may rise, potentially affecting industrial gas demand, prompting JPMorgan to maintain a cautious stance on the gas sector.

Preferred Stocks: JPMorgan favors KUNLUN ENERGY for its limited exposure to spot LNG risks and has set a target price of HKD9, while also rating ENN ENERGY as Overweight with a target price of HKD72.5 due to its hedging capabilities against rising spot LNG prices.

Stock Performance: Several Hong Kong gas companies experienced declines in share prices, with China Gas Holdings down 1.34% and China Resources Gas down 2.44%.

Short Selling Activity: Notable short selling activity was reported, with China Gas Holdings having a short selling ratio of 26.606% and HK & China Gas at 23.762%.

Analyst Ratings: ENN Energy received an "Overweight" rating with a target price increase from 66.5 to 72.5, while HK & China Gas was downgraded from "Overweight" to "Neutral".

Market Updates: Kunlun Energy saw a slight increase in share price, while Jefferies upgraded HKEX to "Buy" and raised target prices for BEA and BOCHK.

JPMorgan's Cautious Outlook: JPMorgan maintains a cautious view on Chinese gas utilities, predicting disappointing annual results and limited improvement for 2026.

Top Picks and Ratings: KUNLUN ENERGY is rated Overweight with a target price increase to $9, while ENN ENERGY is also rated Overweight due to a significant A/H discount, with target prices raised accordingly.

Downgrade of HK & China Gas: HK & CHINA GAS has been downgraded from Overweight to Neutral, with a slight target price increase reflecting its reasonable valuation after recent price hikes.

Market Context: The report highlights uncertainties in the market, suggesting that investors may consider taking profits on some HK utilities amid concerns over US rate cuts.

Market Performance: The Hang Seng Index (HSI) rose by 149 points (0.6%) to close at 26,085, while the Hang Seng Tech Index (HSTI) and the Hang Seng China Enterprises Index (HSCEI) also saw gains, closing at 5,662 and 9,198 respectively, with a total market turnover of $210.47 billion.

Active Heavyweights: Notable stock movements included PING AN (+6.7%), XIAOMI (+1.9%), and MEITUAN (+1%), while TENCENT experienced a slight decline of 0.3%.

HSI & HSCEI Constituents: Key performers included CHINA LIFE (+5.5%), BIDU-SW (+5%), and HANSOH PHARMA (+3.7%), while SHENZHOU INTL saw a significant drop of 3.4%.

HSMI & HSSI Constituents: HAICHANG HLDG faced a sharp decline of 17.5%, and RIMAG GROUP dropped by 13.7%, whereas SINOTRUK gained 3.5%, reaching a new high.

Market Performance: The Hang Seng Index (HSI) fell by 252 points (1.0%) to 25,843, while the Hang Seng Tech Index (HSTI) and the Hang Seng China Enterprises Index (HSCEI) also experienced declines of 1.3%.

Active Heavyweights: Major stocks like Alibaba, Tencent, and HKEX saw declines, with Alibaba closing down 2% and Tencent down 1.1%, amidst significant short selling activity.

Notable Movers: PICC P&C and XPENG faced substantial drops of 3.9%, while TECHTRONIC IND and ENN ENERGY recorded gains, with TECHTRONIC IND up 3.3%.

High Performers: Stocks such as FIH, MMG, and CMOC hit new highs, with FIH increasing by 5.4%, indicating some positive movements in the market despite overall declines.