China cut the interest rate and 991 Datang Power Situation rised 35% in this week

In this good week, China suddenly announced a big cut in interest rate 108 basis points a very very big stimulate action and will offer a around RMB 20 billions compensation premium to China Power stations companies in order to support/help their poor financial situation.

This big cut in interest rate is very positive to such high debt ratio power stocks and in line with the recent big drop in coal price ,both are positive to Power stocks performance. So we can see 991 Datang Power rised 35% in this week, emotion to such power stocks is a bit overbuying. Mr Market was very high and happy in these days.


In past years,China Power companies cannot increase the electricity price because of China's anti-inflation policy which narrow down Power companies profit, and plus flying high coal price bad situation it also affected the stock performance negatively . We can see stock price of 991 Datang drop from 52 weeks highest point HKD 7.43 to recent lowest point HKD 2.15 (in end of oct 2008) that is 0.86 of book value.


I think in recent, 1/China's decreasing interest rate trend, 2/decreasing coal price and 3/continuous domestic consumer stimulate packages ( china want to keep GDP +8%) are very positive to Datang Power 991.

However in this week, 991 Datang Power already rised 35% which is alomost 1.5 times of her book value, therefore we need take care on this stock price situation and consider the speculators money and ask yourself to judge correctly whether it is over-vaule or not? Will money continue move into this section or just a short term hot? ask your self!!!!!!


Belows are some data of 991 Datang Power (991 is the HK stock market list no.)

* Today (11/28)stock price HKD 3.68 per share
* Cash per share HKD 1.60 (43% of sp)
* Current ratio : 0.36x ( very poor)
* Book value: HKD 2.50
* long term debt ratio: 193% (very high, all power stocks get this poor data)


Therefore , can we use HKD 2.50 book value as a guide line for 991 Datang power investment ? question your self please !!!!!!

Good luck !

Ricky