China's Best Performing Stock This Year Is a Defaulting Coal Miner 

(Bloomberg) -- A company that recorded one of China’s biggest corporate bond defaults is emerging as the most popular name among the nation’s stock traders in 2019.

Wintime Energy Co., a coal miner based in China’s northern Shanxi province, has surged 60 percent this year to lead the benchmark CSI 300 Index. Its shares have rallied as investors wait for it to announce details on restructuring efforts, even as it said it sees uncertainty over repaying a 1 billion yuan ($148 million) bond due next week.

Wintime was the second-biggest bond defaulter in China last year after CEFC Shanghai International Group, according to data compiled by Bloomberg. It was sitting on 63.2 billion yuan of outstanding debt as of the end of September. Concerns over its ability to repay the debt put it among the worst-performers on the CSI 300 Index last year, falling more than 60 percent as the stock endured periods of suspension.

It hasn’t finalized a debt restructuring plan, according to a filing to the Shanghai stock exchange dated Tuesday. The coal miner has proposed asset sales to repay debt, including a plan to sell its stake in a power plant by the end of this month, and has said it is in talks to sell some financial investments.

China’s banking regulator on Wednesday said it would step up support for private and small companies by boosting credit supply and keeping financing costs at a reasonable level.

“Stock investors, especially some speculative short-term traders, have bet that the government will rescue private companies with financial difficulties. Wintime is one of them,” said Dai Ming, Shanghai-based fund manager at Hengsheng Asset Management Co., who sold the stock in 2013. “Beijing and the local government will not allow the company to fall when the economy is so weak.”

Wintime surged by its daily limit of 10 percent on Thursday, with trading volume at more than six times its three-month average, while the CSI 300 Index lost 0.6 percent. The stock is overbought based on its 14-day relative strength, after trading near oversold levels for most of December.

“Wintime could be bailed out by the government,” said Guo Feng, an investment adviser at Northeast Securities Co. “It’s a good target for speculative money.”

Such hopes could be tested again next week. “Wintime has proposed asset sales to repay the debt, which might explain the market’s optimism on the stock,” said Michelle Leung, an analyst with Bloomberg Intelligence in Hong Kong. “Having said that, there’s another 1 billion yuan bond due on January 22, which might trigger another default.”

--With assistance from Tongjian Dong, Lianting Tu, Ina Zhou and Amy Li.

To contact the reporter on this story: Jeanny Yu in Hong Kong at jyu107@bloomberg.net

To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, David Watkins, Magdalene Fung

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