As floods hit Henan province, investors get respite with stocks spared from major sell-off

As Henan counts the huge economic damage from an unprecedented flooding, stock investors are finding the market reactions far from disastrous as companies with operations in the central Chinese province ploughed through the crisis.

In and around the capital Zhengzhou – home to the nation’s biggest pig breeder and iPhone assembly lines, some of the listed companies in the province have so far reported limited disruption to their production facilities, according to several stock exchange filings.

Jiaozuo Wanfang Aluminum Manufacturing, whose factory is located about 50 minutes from the capital by high-speed train, fell 2.3 per cent from near a two-month high to 8.54 yuan in Shenzhen trading. It halted production on Wednesday.

The firm is so far the biggest victim as the flood crippled transport and communications in the city. While production has partially resumed on Thursday, the economic losses cannot be estimated for now, according to its filing.

Muyuan Foods, the biggest pig-breeder, said it’s business was operating as usual in the face of those challenges. The stock climbed 0.14 per cent to 50.73 yuan on Thursday, after losing 3.5 per cent Wednesday.

“The flooding is expected to have a limited impact on the capital market,” analysts at Nomura Holdings said in a report. “If the rainfall strengthens again, the unusual weather will probably curb supply of agricultural and industrial goods within the year, adding to inflation pressure and compounding the government’s efforts to stabilise prices.”

The 91 publicly traded companies from Henan province have a combined market capitalisation of US$19.2 billion, Nomura estimates, or 1.6 per cent of value of China’s onshore stock market.

Efforts are underway to get the capital and the province back on its feet after heavy floods killed at least 25 people and displaced around 1.24 million, putting about 8 to 10 per cent of the nation’s grains and pork production at risk.

The province accounted for 5.4 per of China’s economy in 2020, and grew by 10.2 per cent in the first half this year, according to government statistics.

As floods hit Henan province, investors get respite with stocks spared from major sell-off

Henan accounts about 8.1 per cent of China’s pork production. Photo: AP

Henan is also home to the biggest pork processing company Shuanghui Investment and Development and its Hong Kong-listed affiliate WH Group. Both of them have said that their businesses were unaffected by the floods. WH Group shares jumped 1.9 per cent to HK$6.32 in Hong Kong on Thursday, after losing 1 per cent on Wednesday.

Zhengzhou is also dubbed the global capital for smartphones, accounting for one-seventh of all production. Hon Hai Precision Industry, which assembles half of the world’s iPhones output for Apple in the capital city, had given its workers a day off on Wednesday.

Hon Hai, the world’s biggest contract manufacturer, dropped 1.8 per cent to NT110.50 in Taipei, after losing by the same margin on Wednesday.


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