Inflation and Property Prices Rise in China

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

Stocks in China region declined after inflation accelerated in April. Producer prices and consumer prices gained and new lending remained elevated. Property prices in the month soar 12.8% in the month. Hong Kong land auction was completed at 33% discount to the assessed value.

[R]6:00 PM Hong Kong, China – Stocks in China region declined after inflation accelerated in April. Producer prices and consumer prices gained and new lending remained elevated. Property prices in the month soar 12.8% in the month. Hong Kong land auction was completed at 33% discount to the assessed value.[/R]

Stocks in Hong Kong declined on the worries that property prices may fall as government measures to cool the market take hold. Shanghai markets closed lower after inflation accelerated and money supply remain at elevated level in April.

The consumer prices rose 2.8% in April from a year earlier, the fastest increase in 18 months and the property prices jumped 12.8% according to the Statistics Bureau today. Consumer prices increased 2.4% in March.

Producer prices surged 6.8% according to the statistics agency. Retail sales increased 17.8% in the month and industrial production gained 17.8%. Money supply as measured by the indicator M2 increased at 21.5% in the month after rising at 22.5% in March.

The interest rates have not been revised upwards since 2007 ad higher inflation and rising property prices may prompt the government to raise rates. China has avoided increasing rates and worked on other measures to cool down property prices.

The government of China expects to limit full year inflation at 3% and avert property asset bubbles after record credit growth in 2009 and continued increase in lending in the current year.

New lending increased to 774 billion yuan according to the People’s Bank of China in the month, ahead of expectations set by private economists.

Hong Kong’s government sold a land auction site in the city’s Tung Chung area to Nan Fung Development Ltd for HK$3.42 billion today. The winning bid was nearly one third lower than the private estimate of surveyors as measures put in place by the government started to cool demand.

This auction was the first one in the fiscal year beginning April 1. The Hong Kong government sells land through auctions only after developers promise to pay an upfront price as part of an undisclosed reserve price.

The Hong Kong stocks fell today as raising consumer inflation and housing prices stoked concern that government will act further to rein in the economy. The city’s developers pared losses after a government land sale auction.

Hang Seng index in Hong Kong decreased 280.13 or 1.37% to 20,146.51 and CSI 300 index in China lower 57.42 or 2.01% to 2,800.82.

Shanghai Movers

China Shenhua Energy Company Limited decreased 1.2% to 23.82 yuan after the coal producer is in talks with the New South Wales Government in Australia about building a power plant in the area, reports 21st Century Business Herald, citing the Australian Financial Review.

The report was confirmed by vice president of China Shenhua, Wang Jinli. However, he also said the plan is pending energy reform progress in Australia.

China Coal Energy Company Limited fell 1.5% to 9.84 yuan.

DaTong Coal Industry Co., Ltd declined 0.2% to 34.13 yuan.

Gemdale Corporation fell 1.9% to 6.11 yuan.

Jiangxi Copper Company Limited decreased 1.9% to 30.02 yuan after commodity prices rallied.

Poly Real Estate Group Co., Ltd dropped 2.2% to 10.70 yuan after the developer said its contracted sales volume in January-to-April period totaled 12.22 billion yuan or $1.8 billion, up 16.2% from a year ago period.

Qingdao Haier Co., Ltd, the appliance maker, rose 0.8% to 17.00 yuan.

HK Movers

C C Land Holdings Limited fell 2.2% to HK$2.60 after the company announced the un-audited operational data for April 2010. The subscription sales posted a strong year-on-year growth amounting to about 560 million yuan, representing a growth of about 241%, whereas the gross footage area sold reached approximately 72,000 square meters, an increase of about 144% over the same period of last year.

China Construction Bank Corporation, the lender, dropped 1.4% to HK$6.30.

China Oilfield Services Limited gained 4.4% to HK$10.04 after the oil producer said it plans to raise up to 7 billion yuan or $1 billion by selling additional shares in Shanghai.

China CITIC Bank Corporation Limited slipped 2.3% to HK$4.65 after the investment company said it will sell 16.5 billion yuan or HK$18.79 billion worth of subordinated bonds soon to meet the regulatory capital requirement.

CNOOC Limited rose 1.2% to HK$13.10 after the offshore oil producer, is to step up deepwater exploration of oil and gas resources, while developing clean and low-carbon energies, company president Fu Chengyu said on Monday.

Industrial and Commercial Bank of China Limited fell 1.4% to HK$5.60.