China asset injections: 'golden age is gone'

Huaneng Power International, a Hong Kong-listed power producer, has become the latest company to buy assets from its parents. But investors are starting to fear that Chinese asset injections may be mispriced.

Huaneng Power announced at the end of last week that it was paying around $2.2 billion for what one analyst called “highly-geared coal power assets which face overcapacity concerns”.

In other words, it was not the ideal plan for shareholders in Huaneng.

The move sent Huaneng’s stock tumbling, leading it to close down 2.48% on Monday. The short sell ratio of its stock increased to 30% of total volume on the day, from an average of between 10% and 20% usually.

The deal appeared to make little sense for investors, at least as analysts told it. But few investors would have been shocked...

¬ Haymarket Media Limited. All rights reserved.

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