Portfolio | Bright Dairy and Dongfang Electric shares tipped to benefit from SOE consolidation

Spotting the likely stock market beneficiaries of consolidation among state-owned enterprises has become a favoured pastime of investors lately.

Bright Dairy & Food and Dongfang Electric Corp are among the names in the frame for analysts at Credit Suisse.

The State Supervision and Administration Commission (Sasac) planned to reduce the number of central government-owned state-owned enterprises, excluding financial SOEs, to about 40 from the current 112, mainland newspaper Economic Information Daily reported in April.

A Credit Suisse report said Bright Food Group, the state-owned parent of Bright Dairy, was likely to inject Shanghai Dairy Group into the Shanghai-listed dairy products producer.

“M&As are more likely in the same group under one controlling shareholder,” the report said. “Shanghai SOE reform is likely to take place. The consolidation of similar assets and securitisation of unlisted companies under Sasac are two major targets.”

Credit Suisse pointed to the union of state-owned train makers CSR Corp and China CNR Corp as evidence of Beijing’s intent on consolidation in the state sector.