China Petroleum & Chemical Corp.’s shares in Shanghai jumped 6.7 percent to their highest in almost a year after comments from Chairman Fu Chengyu indicated Asia’s biggest refiner will step up its pace of reform.
Sinopec, as the company is known, may announce further restructuring during next month’s government meetings in Beijing, Chairman Fu said on Feb. 25, according to a report yesterday by the China Business News.
The company’s Shanghai-traded shares rose to close at 5.41 yuan, their highest since April 12, after earlier rising by their daily limit of 10 percent to 5.58 yuan. Its Hong Kong-traded shares rose 5.3 percent to close at HK$6.99.
Sinopec last week approved a plan to sell as much as 30 percent of its oil retail unit, which includes the nation’s largest network of fuel stations, as an initial step in government-driven reforms to introduce more private investment in state-owned enterprises. China will host its annual National People’s Congress and the Chinese People’s Political Consultative Conference, or CPPCC, next month in Beijing. Fu is a member of the CPPCC.
“This is a huge step towards Sinopec’s marketing segment reform,” Credit Suisse Group AG said in a research note today. “The time line is earlier than expected and supports our bull thesis. We believe Sinopec’s marketing business restructuring is a clear positive in terms of valuation and company fundamentals.”
Goldman Sachs Group Inc. said in a research note that it had added Sinopec to its conviction buy list, listing positives such as robust refining margins, improved cash flow and natural gas price hikes in China as triggers for the upgrade, according to a research note today.
Fu said China can’t rely on its old development plan to grow the economy any more, according to the newspaper report. Going ahead, the nation needs the bigger companies to “bring along” the smaller firms, he said in Beijing. Lv Dapeng, Sinopec’s Beijing-based spokesman, didn’t answer two calls to his office seeking comment on Fu’s remarks today.
Goldman Sachs also upgraded the nation’s biggest oil and gas company, PetroChina Co., from neutral to buy, saying it will benefit from the gas price hikes, asset sales and positive cash flow in 2015.
PetroChina gained 1.9 percent to HK$8.15, compared with a 1.7 percent increase for the city’s benchmark Hang Seng Index.