Goldman Sachs downgraded the rating of CITIC 1616 Group (01883-HK) from neutral to sold, but raised the target price from HK$2.0 to HK$2.5, which is equivalent to 12 times the price-earnings ratio for FY10, which is consistent with the average price-earnings ratio of Chinese small and medium-sized stocks.

Goldman Sachs said that CITIC 1616 may announce some small-scale acquisitions in the next few months because the company promised to carry out mergers and acquisitions before the end of 2009, but Goldman Sachs believes that judging from the scale/impact of the deal, such news may disappoint the market. Potential negative factors also include investors' concerns that the company may announce weaker than expected results for the second half of 2009, which may trigger a decline in earnings expectations.

CITIC 1616 Group was flat at HK$2.62 yesterday.