Petro China

Stock code:0857.HK

Last close: HK$10.92

Target: HK$13

Support: HK$10

By Lai Wai-shing

The impact of the massive earthquake in Sichuan on PetroChina's production is seen in the temporary suspension of the Nanchong Oil Refinery on May 12 with limited effect, while the production of gasoline at its Lanzhou Refinery in Gansu province, with a daily capacity of 20,000 barrels, has not been affected at all.

In the mean time, the 1,240-km pipeline to the disaster area has resumed operation after emergency repair, pumping much-needed fuel to the disaster area, including Chengdu and Chongqing, at a flow of 600 cubic meters an hour, as of Tuesday afternoon.

The company's 2008 first-quarter profits, calculated according to international accounting standard, stand at 28.89 billion yuan, a drop of 31.5 percent year on year.

The reason for the disappointing performance lies in the state-controlled oil product prices intentionally kept lower than international market prices while the production had to increase, though by a small margin only (8.8 percent), to meet rising domestic demands.

The profit prospects of mainland oil companies this year depends on policy response by the central government to reduce the pressure from having to produce more without matching prices.

One possible measure is to raise the taxable ceiling price, which is just $60 a barrel at present.

Another is to reform the pricing mechanism of oil products so as to balance the relationship between oil companies' business return and factors such as social consumption and inflation.

The author is a senior independent comementator.

China Life

Stock code: 2628.HK

Entry: HK$28

Target: HK$35.50

Stop loss: HK$27

Last close: HK$33.05

By Castor Pang

China Life's strategy over the last two years has been based on penetrating the rural market and second-tier cities in China, with aview to boosting its insurance earnings.

However, this strategy is now expected to result in increased payouts stemming from the Sichuan earthquake, likely exceeding its payouts over the snowstorms earlier this year.

An expected influx of insurance payments for earthquake victims combined with falling returns from the trading of its A-shares on mainland stock markets, will no doubt impact China Life's profits this year.

That's why its share price may fall below the bottom of the last rebound. If China Life drops below the HK$32 support mark, it may hit as low as HK$28. Investors are advised to buy at that level for a rebound up to HK$35.50 later on.

The author is a strategist of Sun Hung Kai Financial Group.

(HK Edition 05/15/2008 page3)