China Stocks Slide; Swire IPO Shelved

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

Chinese stocks fall on European debt crisis Swire Properties shelves its IPO. PetroChina to boost refining capacity. Li & Fung sells $400 million bond amid tough markets.

[R]10:35 PM Hong Kong, China – Chinese stocks fall on European debt crisis Swire Properties shelves its IPO. PetroChina to boost refining capacity. Li & Fung sells $400 million bond amid tough markets.[/R]

The benchmark Shanghai Composite Index slid to an eight month low as stocks fell on concern European debt crisis will halt global economic recovery spurred the biggest drop in US equities in a year.

Swire Properties Ltd shelved its HK$20.8 billion IPO as a widening government debt crisis in Europe battered the IPO market.

The decision was made considering the deteriorating market conditions, said Swire Properties’ parent Swire Pacific Ltd in a statement to Hong Kong stock exchange yesterday.

A yuan appreciation is more likely to slow global economic growth and backfire on countries that called for a stronger Chinese currency, according to the Inter-American Development Bank.

Policy makers in China have indicated they are waiting clearer signs of a global rebound before allowing gains in the yuan, which has been pegged at 6.83 per dollar since July 2008.

Offshore convertible bonds are issued by Chinese companies to global investors, denominated in yuan and settled in dollars. Country Garden’s Bonds due in 2013, Hidili’s bonds due in 2012, and New World China’s zero % bond due in 2012, are among offshore convertibles that offer the best return potential for investors should yuan be revalued, according to Steve Wang, a credit strategist for Bank of China International.

The Shanghai Composite Index’s 14-day relative strength index or RSI, slumped to 21.2 today, the lowest level since September 18, 2008. The RSI identifies possible turning points in indexes or securities by measuring the degree that losses and gains outpace each other in a given time period.

A measure below 30 signals a possible rally according to technical analysts. The index shows a possibility that China stock market may rebound from its eight month low.

Hang Seng index in Hong Kong decreased 213.12 or 1.06% to 19,920.29 and CSI 300 index in China fell 60.07 or 2.07% to 2,836.79.

Shanghai Movers

Air China Limited decreased 2.6% to 12.56 yuan after the international carrier said the nation''s tax exemption for international flights may save it 549 million yuan ($80.4 million), based on calculations using 2009 earnings.

Aluminum Corporation of China Limited the maker of the lightweight metal fell 3.0% to 10.20 yuan.

China COSCO Holdings Company Limited the operator of dry-bulk ships decreased 4.8% to 11.11 yuan.

Jiangxi Copper Company Limited fell 3.4% to 29.63 yuan.

PetroChina Company Limited fell 2.2% to 11.06 yuan after the oil company started construction to more than triple the capacity of its Ningxia refinery at a cost of 7.4 billion yuan ($1.1 billion) as fuel demand in northwestern China rises.

Shanghai Dragon Corporation an apparel maker and exporter in China’s financial hub fell 3.5% to 7.90 yuan.

HK Movers

Esprit Holdings Limited slipped 5.9% to HK$49.20.

HSBC Holdings plc (Hong Kong) dropped 4.3% to HK$73.60.

Li & Fung Limited fell 1.6% to HK$36.30 after the trading and sourcing company has raised $400 million from a 10-year offering its second US dollar bond ever.

Swire Pacific Limited added 4.3% to HK$84.55 after it called off its planned $2.7 billion property IPO due to global market turmoil.

The Wharf (Holdings) Limited fell 1.5% to HK$40.65.