STOCKWATCH: Hong Kong H-shares outperform on positive China fundamentals

HONG KONG (AFX-ASIA) - H-shares were higher, outperforming the broader market, on expectations that healthy China economic fundamentals will continue to boost their bottom lines, dealers said.	    However, they said the current buying focused on relatively small cap state-owned enterprises whose profitability has been not as impressive as the major H-shares, adding the gains have been speculative to some extent.	    At 10:46 am, the Hang Seng China Enterprises index was up 8.72 points at 452.15, while the Hang Seng index was down 41.43 points at 13,406.70 on turnover of 1.86 bln hkd.	    Harbin Power rose 0.06 hkd or 7.07 pct to 0.91 after its 2000 results.	    Dongfang Electrical gained 0.08 hkd or 7.54 pct to 1.14 and Northeast Electrical added 0.05 hkd or 6.84 pct to 0.78.	    "The momentum of the H-share sector remains in place. It seems to me that investors are very upbeat about China's economic fundamentals, expecting its robust economic growth will further lift profitability of these state-owned companies," an analyst with a European brokerage.	    The analyst said her brokerage constantly receive buying orders from Hong Kong and overseas investors to pick up H shares.	    "Compared with the (average) PE ratio of about 40 times for A-shares and 50 for B-shares, H-shares' PE of 10 is very attractive," the analyst said.	    "To my knowledge, some investors are moving their funds to Hong Kong from China's A-shares and B-shares market," the analyst said. 

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