Olympic Stocks..
May 7 (Bloomberg) -- The biggest beneficiaries of the Beijing Olympics are turning into also-rans on concern their shares climbed more than justified by the potential to profit from the August athletic contests.
The 23 companies whose earnings Macquarie Group Ltd. said in November 2006 will get a boost from the Games fell by an average 21 percent this year compared with a 12 percent drop in the Hang Seng China Enterprises Index, data compiled by Bloomberg show. Air China Ltd., the nation's largest carrier, led the tumble, losing half its value this year, while Beijing Capital International Airport Co. dropped 36 percent.
Even after the declines, the Olympic stocks are expensive, trading at an average 30 times reported profit compared with 19 times for the Hang Seng China index of 42 Hong Kong-listed shares. The Olympic stocks rose 69 percent on average in 2007, more than the index's 56 percent gain, on expectations the Games will spur demand for everything from sporting goods to hotel stays.
``Companies that are Olympic-related went up just on the basis of Olympics with no good fundamentals,'' said Mark Mobius, who oversees $47 billion in emerging-market equities at Templeton Asset Management Ltd. in Singapore. ``We have not bought any because the prices went up too fast and too high.''
Travel Demand
Olympic shares fell further behind as the Chinese stock market rallied in April. The basket of Olympic stocks created by Macquarie, Australia's biggest securities firm, rose 5 percent last month compared with an 18 percent gain in the Hang Seng China index.
``It's interesting but there aren't that many direct Olympic plays and you've got to wonder whether it's already a crowded trade,'' said Samantha Ho, a Hong Kong-based fund manager who oversees more than $3 billion of Hong Kong and China equities at Invesco Asia Ltd. ``Valuations were stretched last year.''
Air China doubled between July 1 and Oct. 30 as the carrier announced plans to add routes and staff to fly the 1.7 million people that Olympic organizers estimate will travel to Beijing for the games.
Beijing Capital, operator of the city's airport, climbed 39 percent in the same period as Asia's second-busiest airfield said it would open a runway for Olympic air traffic.
Beijing North Star Co., the property arm of the city's government, surged 51 percent on its first day of trading in Shanghai in October 2006 on expectations the Olympics would increase construction projects and spur sales. The company, which is building the Olympic Media Village, more than doubled in Hong Kong trading during the first eight months of 2007, hitting a record HK$7.89 on Aug. 27.
`Dramatic Fall'
The retreat started this year amid a slump in Chinese stocks that dragged down the benchmark CSI 300 Index by 28 percent after two years of gains. The shares are set to recover, said Tim Rocks, Macquarie's Hong Kong-based strategist, who compiled the bank's Olympics stock list.
``We've seen a dramatic fall across the entire China universe, and the reasons for that are overstated,'' Rocks said. ``Tourism and property stocks, which will benefit from Olympics demand, will do better than the broader market once overall dynamics improve.''
JF Asset Management Ltd.'s Howard Wang said he doubts earnings will benefit enough from the Olympics to justify higher share prices. Beijing Capital boosted annual profit at the slowest pace in four years in 2007. Beijing North Star's profit increased 17 percent last year to 463.1 million yuan ($66 million), compared with a 55 percent gain in 2006.