STOCKWATCH: Hong Kong telecom shares sharply higher on technical rebound

HONG KONG (AFX-ASIA) - Telecom shares were sharply higher on a technical rebound, tracking the strong overnight performance in their U.S. and European counterparts, dealers said.	    They said, however, that the rally in the sector is likely to be short-lived as cautious investors remain largely sidelined ahead of China Mobile's results due Monday, they added.	    At 11:34 am, China Mobile was up 3.20 hkd at 32.90, China Unicom was up 0.75 at 8.60, Hutchison Whampoa was up 2.00 at 80.25, PCCW was up 0.075 at 2.675, SmarTone was up 0.35 at 8.75 and Sunday was up 0.005 at 0.42.	    The Hang Seng Index was up 475.72 points at 12,539.43.	    Patrick Wong, an analyst with Asia Financial Securities, said the rally in the sector was purely "technical", following the performance on Wall Street.	    "The encouraging overnight performance by NASDAQ and DJIA has lent support to local telecom shares, but the rally in the domestic telecom shares is likely to be short-lived, with players reluctant to enter the market ahead of China Mobile's 2000 results announcement on Monday," he said.	    Wong said he expects China Mobile to post a 2000 net profit of around 26 bln yuan, compared with 4.79 bln yuan a year earlier.	    "However, investors are now not looking at results alone. Like China Unicom, despite its stronger-than-expected 2000 results, the stock only staged a session rally earlier this week. The overall outlook on the telecom sector remains uncertain," Wong said.	    Benjamin Tam, an analyst with Dao Heng Securities, said, the telecom sector is expected to see contined volatile trade.	    "The European telecom companies are expected to remain under pressure through the second to third quarter this year amid fund raising concerns over the development of 3G mobile services. Local telecom counters will also be pressured, following the uncertain outlook in the regional markets," Tam said.	    In view of this, Tam said he will recommend China Mobile and China Unicom, with the two stocks having a better earnings outlook in mainland China.	    "We recommend a 'buy' on China Mobile and China Unicom, with a 12-month price target for the two stocks at around 50.00 hkd and 16.00 hkd, respectively," he said.	    He said China Mobile, however, in the short run, may come under pressure amid concerns that major institutional funds will have to continually offload some of their holding to meet redemptions.	    Tam said he recommends a 'sell' on PCCW, as the company's business prospects remains bleak.	    "We don't see any positive signs in the company's business earnings outlook," he said.	    In the short term, PCCW are likely to continually come under pressure due to arbitraging activity until Cable & Wireless' 1.50 bln usd in exchangeable bonds convertible to PCCW shares close on April 12, Tam said.    

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