Datang Power and Huadian Power should offer the best returns for investors in Chinese power stocks, JP Morgan analysts said Wednesday.

Hong Kong-listed Datang International Power Generation and Huadian Power International Corp. could return 15-20 percent, including dividend income, over the next 12 months, Edmond Lee of JP Morgan told reporters on a conference call.

JP Morgan has an "overweight" rating on the two stocks.

China is among the fastest-growing major power markets in the world, with annual electricity demand growth at 12-14 percent.

Chinese power stocks were showing signs of recovery as coal prices appeared to be stabilizing and they had been allowed to pass on part of their fuel costs to consumers, but investors needed to be selective, Lee said.

Most Hong Kong-listed China power shares had lost from 1.7 percent to more than 5 percent so far this year, compared with an average loss of over 2 percent for most power stocks listed in Asia Pacific. Datang was an out-performer, gaining 1.7 percent.

An acute power shortage in China brought about by the country's economic growth has sent domestic power companies scrambling to build new power stations.

The shortage is being eased, although it is not expected to disappear until mid-2006.A surplus is already emerging in eastern China's Jiangsu and Zhejiang provinces, where many of Huaneng and China Resources Power's plants are located.

Datang's home base of northern China remained under supplied, with its growth also helped by its ability to source cheaper coal and new power projects to come on line soon, Lee said.

.Source: Shenzhen Daily