China Stocks Weak; Property Worries

Mayank Mehta, Chandrasekhar Atreya and Darlington Musarurwa
04 May, 2010
New York City

Market indexes in Shanghai and Hong Kong declined after investors worried that an increase in bank reserve ratios may not be enough to stem real estate price increase. GD Midea to buy 32.5% stake in Egypt based MIRACO for $57.5 million. Petrochina to increase investment in Indonesia for energy.

[R]8:00 PM Hong Kong, China – Market indexes in Shanghai and Hong Kong declined after investors worried that an increase in bank reserve ratios may not be enough to stem real estate price increase. GD Midea to buy 32.5% stake in Egypt based MIRACO for $57.5 million. Petrochina to increase investment in Indonesia for energy.[/R]

The benchmark index in Shanghai fell to its lowest in seven months on concern that higher bank reserve ratios will not be enough to avert real estate buble in the world’s third largest economy.

The People’s Bank of China increased bank reserve ratios by 50 basis points effective May 10 according to a statement on its Web site. The current level is 14.5% for smaller banks and 16.5% for larger banks.

Inflation is a concern and economic growth may have been a little bit too fast, said Vice Finance Minister Li Yong while speaking at an Asian Development Bank event at Tashkent.

Manufacturing grew at a slower pace in April as per survey of more than 400 companies indicating that government efforts to prevent effects of overheating in the economy maybe starting to take effect.

China needs to rein in credit to keep price increases in control even after the reserve deposit requirement for financial institutions was raised by the government, said the China Daily today in an editorial.

Rising fuel costs are a concern and are not attractive for hedging. However Cathay Pacific Airways Ltd, Hong Kong’s largest carrier has its fuel needs reasonably well hedged for the next 12 months said CEO Tony Tyler in a Television interview in Hong Kong today.

Hang Seng index in Hong Kong decreased 48.31 or 0.23% to 20,763.05 and CSI 300 index in China fell 47.92 or 1.56% to 3,019.45.

Shanghai Movers

China Vanke Co., Ltd the property developer decreased 3.7% to 7.50 yuan.

China United Network Communications Limited closed unchanged at 5.89 yuan after the company said first quarter net profit declined 68.3%.

Citic Securities Company Limited plunged 9.9% to 26.05 yuan after the broker announced that it will form a strategic cooperation partnership with Credit Agricole Corporate and Investment Bank.

GD Midea Holding Co rose 1.1% to 19.05 yuan after the appliance maker said it has agreed to buy a 32.5% stake in Egypt’s Misr Conditioning from United Technologies Corp. for $57.48 million, according to a filing with Shenzhen’s stock exchange.

PetroChina Company Limited fell 0.9% to 11.99 yuan. The oil company is increasing investment in oil and gas exploration and development in Indonesia through its local subsidiary by 30% this year, Xinhua news agnecy cited a local media as saying on Monday.

Poly Real Estate Group Co., Ltd declined 7.6% to 11.40 yuan after the company said first quarter net profit rose 66%.

HK Movers

Cathay Pacific Airways Ltd rose 0.7% to HK$16.28 after the company’s Chief Executive Officer Tony Tyler said the carrier’s fuel needs are “reasonably” well hedged for the next 12 months.

Chow Sang Sang Holdings International Limited the jewelry maker advanced 2.7% to HK$13.56.

Giordano International Limited the clothing retailer added 1.9% to HK$3.76.

Sands China Ltd the publicly traded casino operator fell 1.3% to HK$12.78.