Geely stock rising over speculation

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So says Reuters:

SHANGHAI, Oct 29 (Reuters) – Geely Automobile (0175.HK), whose shares have soared as its parent’s bid for Ford’s (F.N) Volvo, could win a valuable brand if the bid succeeds, but could take years to see profits from the loss-making Swedish carmaker.

Home-grown Geely, which means “lucky” in Chinese, is hungry for modern and innovative technologies that can upgrade its cars to tap the growing affluent auto market in China, the biggest in the world.

“I think the market is still divided on the Geely deal,” said Chen Qiaoning, an analyst with ABN AMRO TEDA Fund Management.

“If its parent indeed gets Volvo and the deal serves it well, the listed firm would benefit tremendously. But if they are unable to handle Volvo … the listed company will suffer.”

Market watchers have been hopeful that Geely, which used to make China’s cheapest cars, would reap benefits in better brand recognition and new technology if its parent, Zhejiang Geely Holding, can buy Volvo and turn the company around.

Investors have bid up Geely’s stock more than four-fold this year, sending it to a record high on Thursday, even as the broader market slipped.

Ford Motor named Zhejiang Geely Holding Group as a preferred bidder for its loss-making Swedish unit Volvo Car Corp late on Wednesday, bringing the long-running sale process closer to a conclusion. [ID:nLS682068]

“That for sure will shorten the technology development time for Geely,” said Vivien Chan, auto analyst with Sinopac Securities Corp.

“If the parent company buys Volvo, it will fine tune its production line before it will be injected into the listed firm, and it probably will take a few years,” She added.

GROWTH STOCK

Geely shares rose as much as 4.5 percent to HK$3.0, the highest since the company was listed in 2004 after buying a shell company. The stock ended Thursday up 2.1 percent, beating the benchmark index .HSI, which fell 2.3 percent.