Ken Ho, head of China research of JP Morgan in the Hong Kong Special Administrative Region (HKSAR) said, "Domestic consumption would offer a strong growth potential towards the second half of this year, and sectors benefiting most from deregulatory changes include telecom, power, airlines, and oil and gas - the four pillar industries."

Ko said mixed macroeconomic numbers for recent months, rising liquidity, both internally and externally and the currently cheap valuations of shares are pointing to the bullish direction.

"On the Telecom sector, we'll see a continued increase in subscribers at a very fast rate on the introduction of competition. On the Airline industry, consolidation is the trend of development.

"On the oil and gas sector, we can see an improvement in efficiency of the companies which can expand their reserves via overseas acquisition as well as exploration and commercialization of gas reserves," Ho said.

China's carrying out of progressive reforms has been recognized by institutional investors from major financial centers, he said.

The investors expressed their confidence in the reforms at the China Conference: Roadmap to China's Industrial Reform, which took place in London, Singapore and Hong Kong SAR from April 29 and May 3, he said. The conference was organized by JP Morgan.

"Industry experts expressed satisfaction that China's reform that is on-going and progressing in a determined manner. During the conference, investors in Europe want to know more about the general direction of reform, whereas the Asian investors are more interested in the implementation details," he said.

Ho is also sanguine that the so called qualified domestic institutional investors will appear in the second half of the year, acting as catalyst for the China market. "H" shares will benefit most from their emergence to be followed by the red chips," he said.

( May 4, 2002)