Towngas China Combines Natural Gas, Mainland China

Hong Kong's market, investors' gateway to mainland China, has shown real efforts recently to steady itself after a long slump.

The iShares MSCI Hong Kong (EWH) exchange-traded fund shows a 4.3% year-to-date return. That puts it in a tie for fourth place with the iShares MSCI South Africa (EZA) ETF on IBD's Daily World Map (where the first two slots are held by the Nasdaq and the S&P 500).

Hong Kong's 12-month return, -13%, shows how this index has clawed back in recent months.

This column on Thursday examined China's shift toward natural gas as part of its long-term energy plan, and one company that seems poised to benefit from that strategy, pipeline company Enn Energy Holdings.

Here's another Chinese natgas play, also based in Hong Kong and doing business in the mainland:

Towngas China is a long-established name in Hong Kong, where the company supplies gas to more than 1.75 million customers using its own vast pipeline network.

But the company's growth is in mainland China. Towngas China has been acquiring companies and breaking ground in the People's Republic to grab its share of what seems to be a growth niche in the world's biggest emerging market.

The company says its mainland activities number "more than 138 projects, including piped city gas projects, upstream and midstream developments, water and wastewater treatment schemes (and) natural-gas filling stations..."

Towngas China's chart shows a breakdown from a five-week flat base in the week ended May 18. But the stock's decline was so limited that one could say the flat base, now in its 11th week, is still under construction.

It's also possible the stock is in the fifth week of a new base, one that runs just 14% deep. The depth suggests it will be another flat base.

The buy point that appears so far is HKD 5.99. The Relative Strength line is near a new high.

Towngas China, like most Honk Kong listings, reports financial results twice yearly. Its past three results show earnings gains of 60%, 40% and 48%.

Sales shrank 13% in the second half of 2010, then rose 58% and 36% in the following two reports.

One possible head wind is the expiration of some PRC tax breaks in December.