China Stocks Decline, Property Bond Worries

Mayank Mehta, Chandrasekhar Atreya and Sanjay Barot
31 May, 2010
New York City

Stocks in Shanghai and Hong Kong declined after a rating agency downgraded Spain

[R]5:00 PM Hong Kong, China – Stocks in China region closed lower on the worries that property developers may be forced to pay higher interest rates. The yields on dollar property bonds widened as foreign investors worry slowdown in the sector. Bank of China to sell 40 billion yuan convertible bonds Wednesday. China Minsheng Bank gets approval for bond offering. Yunnan Copper to invest $500 million.[/R]

Stocks in Shanghai and Hong Kong declined after a rating agency downgraded Spain’s sovereign debt rating sparking fears that the euro-zone debt crisis will widen. Dollar property bonds yields rose to one-year high after foreign investors worry that construction sector may face a significant slowdown.

The Hang Seng Index fluctuated and changed marginally as more shares gained than lost, after Spain’s downgrading by Fitch raised hopes that central bank in US will delay raising interest rates.

Hang Seng index in Hong Kong decreased 1.52 or 0.01% to 19,765.19 and CSI 300 index in China ended lower 77.04 or 2.70% to 2,773.26.

June futures on the Hang Seng Index gained 0.1% to 19,733.

Hong Kong-based JT Capital Management Ltd plans to raising as much as $100 million for the fund, said Chief Investment Officer Larry Zhang in an interview on May 28. The fund will trade Chinese stocks listed domestically or on an international exchange such as Hong Kong or the US.

Zhang had earlier advised the National Social Security Fund, China’s state pension pool for two years. He along with Kurt Baker, a former Morgan Stanley prime brokerage head in Asia, will jointly oversee the operations of the fund.

While speaking at Nippon Keidanren, Japan’s biggest business lobby, Chinese premier Wen Jiabao said, ‘We must closely monitor and take measures to prevent a double-dip recession, since Euro-zone debt crisis may have a negative impact on the Japanese and Chinese economy.’

Hatoyama and Wen agreed today to start negotiations to jointly develop natural gas fields in the East China Sea, according to an official of the Japanese Foreign Ministry who was briefed of the meeting.

Shanghai Movers

Bank of China Limited added 2.0% to 4.09 yuan after the lender plans to sell 40 billion yuan or $5.9 billion worth of bonds convertible to its Shanghai-listed shares on Wednesday as part of its fund-raising program to meet stricter capital requirements.

China Vanke Co., Ltd, the developer, fell 2.9% to 7.21 yuan.

China Minsheng Banking Corp., Ltd fell 2.1% to 6.54 yuan after the bank received regulatory approval to sell 5.8 billion yuan or $850 million in subordinated bonds, the bank said in an announcement.

China State Construction Engineering Corporation Limited fell 1.6% to 3.59 yuan after the housing contractor said it won 11.67 billion yuan of building projects.

COSCO Shipping Co., Ltd, the shipping company, dropped 5.0% to 7.46 yuan.

Faw Car Co., Ltd fell 3.7% to 16.79 yuan.

SAIC Motor Corporation Limited decreased 3.7% to 16.62 yuan after the carmaker reported that General Motors India announced on May 27 that it will launch commercial vehicles and passenger cars from the product line-up of GM''s Chinese partner SAIC Motor by the end of next year according t media reports in India.

Shandong Gold Mining Co., Ltd fell 2.3% to 39.59 yuan after the company acquires full control of Xinlai Mining.

Yunnan Copper Co.,Ltd dropped 4.7% to 21.16 yuan after the copper producer, said Sunday that it will invest 3 billion yuan in a new project in Liangshan Yi Autonomous Prefecture in the southwestern province of Sichuan.

[HK Movers

Brilliance China Automotive Holdings Limited advanced 2.4% to HK$2.54.

BYD Company Limited rose 2.0% to HK$65.30 after Germany''s Daimler AG and its Chinese partner, BYD Co Ltd last week set up a 50:50 joint venture, which is called Shenzhen BYD Daimler New Technology Co, to jointly create a new brand of electric cars for Chinese market, sources reported.

China Merchants Holdings (International) Co. Ltd. rose 1.05% to HK$24.30 after the cargo container was upgraded to “overweight” from “underweight” at HSBC Holdings Plc.

Foxconn International Holdings Limited the contract maker of mobile- phones fell 1.5% to HK$5.68.

Standard Chartered PLC fell 1.0% to HK$183.50 after the lender raised £366 million in Indian sale.