HONG KONG: Shares of Geely Automobile Holdings Ltd surged 6 percent yesterday, bucking the downward trend of the broad market, after the mainland car maker revealed strong sales figures and offered an upbeat forecast.

The stock jumped HK$0.26, or 6.0 percent, to close the day at HK$4.59 after hitting an intraday high of HK$4.67 while the benchmark Hang Seng index closed down 264 points, or about 1 percent, at 22,061.

Trading in the stock was suspended from 10:05 in the morning till 2:30 in the afternoon yesterday pending the release of price-sensitive information.

The car maker said in a statement issued during the period of trading suspension that it sold approximately 250,000 units in the first 10 months of the year, which represented 100 percent of the company's original sales target for the whole year.

As a result of the strong sales in the first 10 months, the company now expects to sell over 300,000 units for the full year of 2009.

The company also said it had set a preliminary sales target of about 400,000 units for 2010, representing a year-on-year growth of about 33 percent.

It has earmarked 1 billion yuan as capital expenditure for next year to expand production capacity, up 25 percent from this year, the company said.

The strong performance of the stock yesterday may also have something to do with potential acquisition moves by the company.

With over 4 billion yuan of cash, Geely will keep an eye on potential acquisition opportunities, particularly in the engine manufacturing sector, Lawrence Ang, an executive director of Geely, told media on Monday.

Acquisition opportunities could surface soon as the automobile industry in the US and Europe is expected to remain fragile next year, the executive said.

The car maker's parent company is currently bidding for Ford's Volvo unit, and has been listed as the preferred bidder.

Market watchers are generally positive about the medium- to long-term outlook for the mainland automobile industry in general and for Geely in particular, citing favorable government policy.

"The central government has made it clear that it will continue to boost domestic demand next year," said Linus Yip, a strategist with First Shanghai Securities Ltd.

With exports - formerly one of the three engines for economic growth - having slumped after the onset of the global economic downturn, the central government implemented a 4 trillion yuan stimulus package to support the economy, which included measures to boost domestic consumption.

Conita Hung, head of research at Delta Asia Securities Ltd, is also bullish about the prospect for the mainland automobile industry, citing the low penetration ratio in addition to favorable policies.

However, First Shanghai's Yip cautioned investors about potential corrections in share prices of automakers in the short term as they have climbed "quite a lot" recently on news about strong sales in the industry.

China Association of Automobile Manufacturers estimated last month that the sales volume of vehicles this year in the mainland would likely hit 13 million units, up 38.5 percent from last year.

(HK Edition 12/09/2009 page4)