UBS maintained its 2299.HK neutral rating, lowering its target price from HK $4.60 to HK $4.40 after cutting its earnings per share forecasts for fiscal year 11, fiscal 12 and fiscal 13 by 1 per cent, 3 per cent and 5 per cent, respectively, reflecting a narrowing of the price gap between petrochemicals and polyester products.

UBS said that if the price spread of polyester products narrowed, Baihong, a polyester filament producer, would have a negative impact on its financial performance.

Based on the assumption that new capacity will far outpace demand growth, UBS expects profit margins for the polyester maker to be under pressure in the fourth quarter of 2011.

Baihong Industries fell 1.12 per cent to HK $4.43 yesterday.