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Today, some of our orders in China were executed. We took profits on China Telecom after the company announced yesterday that it would issue new shares, we took advantage of Tongda‘s rights issue announcement to double up on our position, and we added a new position in Huaneng Power with the company trading at very low P/Es and a high dividend.
The US stock market is on fire with retail traders buying record levels of shares ahead of the earnings reports, Yesterday’s bumper results form Twitter are sending technology share to record high and we got stopped out on most of our short US tech stocks at the opening.
Clearly, earnings are strong in the recovery with US corporate Leverage at extremes again.
As we highlighted many times, all these new records are based on weak breadth and speculative investors with extreme valuations. However, there is no point in fighting the trend and clearly, every time the market weakens, retail investors come in with a vengeance to buy the dips.
Next week will be crucial with the corporate earnings of most companies coming out.
Investors are expecting and pricing the best… Let’s see what happens.
As far as we are concerned, we are keen to protect our performances and reduce risk overall.
Huaneng Power 902 HK
Huaneng Power International, Inc. provides electricity generation services. The Company offers electricity transmission, electricity distribution, power transformation, and other related services. Huaneng Power International provides services in China.
Extended Company Description (Source: Hoover’s Inc., a Dun & Bradstreet Company)
Huaneng Power International is one of China’s largest independent power producers. Its nearly 50 power plants in about 20 provinces have a capacity of more than 66,700 MW; nearly all of the company’s power is produced from coal.
Huaneng Power International, which is always expanding, also owns Singapore’s electricity retailer Tuas Power. Huaneng Power International sells power to local utilities, primarily in China’s coastal provinces. Huaneng International Power Development Corporation, a subsidiary of the China Huaneng Group, owns 36% of Huaneng Power International; China Huaneng Group, 16%. Huaneng Power International was formed in 1994.
The company is trading on 6.28x earnings and pays almost 8 % in dividends.
The gap between its price action and its earnings per share has never been so great
The company should recover form the 2021
On July 13th 2021, Huaneng reported its earnings for the 1st half of 2021
- Huaneng Power International reported 102.917B kWh total electricity sold by power plants within China on consolidated basis; this indicates an increase of 12.51% Y/Y.
- Of the 26 regions in which the Company operates, 22 regions have achieved positive Y/Y growth in power generation.
- In 1H21, the company’s total electricity sold by power plants within China on consolidated basis amounted to 207.926B kWh (+20.8% Y/Y).
- Huaneng Power’s sales volume recovery in 1Q 2021 was encouraging, but this was partially offset by a slight decline in the company’s average on-grid settlement price during the same period.
- Higher coal prices led to a lower gross profit margin for Huaneng Power in the most recent quarter, and this remains the key risk factor for the company’s near-term profitability.
- A successful pivot towards renewables, in the long run, will help to re-rate Huaneng Power’s shares, but this is partly constrained by the company’s relatively high financial leverage.
- Huaneng Power is currently valued by the market at 0.30 times trailing P/B and 5.5 times consensus forward FY 2022 P/E, and it offers a consensus forward FY 2022 dividend yield of 9.2%.
China launched its long-awaited national carbon trading market on July 16. The Chinese emission allowance (CEA) opened at 48 Chinese yuans per metric ton (CNY/t), equivalent to 6.28 euros per metric ton (EUR/t).
The price then reached 52.80 CNY/t (6.90 EUR/t) – equating to the maximum 10% intraday rise – thereby preventing any further increases. The CEA eventually closed at 51.23 CNY/t (6.7 EUR/t), totaling 4.1 million allowances on the first trading day,
according to Shanghai Securities News. On the second trading day, the CEA price remained above 50 yuan (52.30 CNY/t or 6.83 EUR/t) but volume fell 97% to 130,800.
The European emission trading system (EU ETS) is unlikely to be affected by any other scheme globally, in the absence of linkages. European emissions
allowances (EUAs) have traded at record highs this year, averaging 44.83 EUR/t. This is despite the U.K. leaving the EU ETS, which is bearish in the short term.
China’s new ETS accounts for 6.4% of global emissions. The initial scope includes around
2,200 power generation companies, including Huaneng Power accounting for 4.5
gigatons of annual emissions. The amount represents around 40% of China’s energy-related emissions. The first compliance cycle covers 2019 and 2020 emissions with the compliance deadline due on December 3, 2021 for both of those years.
New Asset Allocation
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