Date
22 September 2017
When uncertainties and market noises bring short-term setbacks, those are good buying opportunities, provided you have strong belief in long-term trends. Photo: chatwithtraders.com
When uncertainties and market noises bring short-term setbacks, those are good buying opportunities, provided you have strong belief in long-term trends. Photo: chatwithtraders.com

Making the most out of short-term market concerns

Internet stocks continue to outperform. New-economy stocks in the environmental protection sector such as natural gas distribution, refuse combustion, sewage treatment, etc. have also posted remarkable gains.

While these good stocks rarely come cheap, there are still opportunities to find bargains, that is when share prices get depressed by market noises.

Take the gas distributors as an example. Three months ago, this group of stocks was hit by rumors that the National Development and Reform Commission will set a 6 percent cap on their rate of return. Most of such plays slumped 5-6 percent in a single day in reaction to the rumors.

Eventually, the government confirmed the return ceiling to be 7 percent, excluding installation fees, which are another major source of return.

Currently, gas accounts for only 6.5 percent of China’s total energy consumption. It remains far below the global average ratio of 25 percent. And the authorities intend to lift the gas usage to 10 percent in 2020 and 15 percent by 2030.

The policy mandate is very clear, therefore, China is keen to promote the use of gas as part of its clean energy policy, and the last thing the government wants is to stall the development of the gas industry. Investors should bear this in mind whenever there is market noise.

Prospects for other environmental protection companies are also positive.

The nation’s population of 1.4 billion people creates massive trash on a daily basis. Sewage treatment is also essential. Therefore, these sectors should enjoy strong policy support and steady earnings growth in coming years.

But even for the best companies, share price won’t just keep going up. There will always be ups and downs.

But when uncertainties and market noises bring short-term setbacks, those are good buying opportunities, provided that you have strong belief in long-term trends.

The same goes for the tech sector. Despite their huge success and cutting edge products, there would be worries from time to time, like whether the government will step up regulation, or whether the growth will lose momentum.

For those who recognize the true value of these tech plays, they will ignore the so-called bad news, focus on their-long term business potential and make the most out of short-term market concerns.

This article appeared in the Hong Kong Economic Journal on Sept. 13

Translation by Julie Zhu

[Chinese version 中文版]

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RT/RA

Columnist at the Hong Kong Economic Journal

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