HK Stocks in 8-Day Rally

Mayank Mehta, Chandrasekhar Atreya and Sanjay Barot
18 Jun, 2010
New York City

Hong Kong stocks continued its rally to the eighth day after a Spanish bond sale ease concerns about Euro-zone debt crisis. World Bank releases its quarterly report on China. Strike extends to a parts plant of Toyota in China. China Vanke says no change in development plans.

[R]5:00 PM Hong Kong, China – Hong Kong stocks continued its rally to the eighth day after a Spanish bond sale ease concerns about Euro-zone debt crisis. World Bank releases its quarterly report on China. Strike extends to a parts plant of Toyota in China. China Vanke says no change in development plans.[/R]

The indexes in China had a steep decline with pharmaceutical, technology and consumer companies leading the decliners. However, Hong Kong stocks rose for the eighth day, driving the index to a five-week high, after a Spanish bond sale eased concerns about Europe’s debt crisis.

Hang Seng index in Hong Kong increased 148.31 or 0.74% to 20,286.71 and CSI 300 index in China ended lower 46.57 or 1.70% to 2,696.17.

China should use the exchange and interest rates more to manage its economy, said the World Bank in its quarterly report on China.

A more flexible and stronger yuan would give China more freedom to decide on their monetary policy and help reduce inflation pressures by reducing import costs and rebalance growth towards consumption, the Washington-based World Bank said in its report released in Beijing today.

China, holder of the world’s largest foreign currency reserves, should try and adjust its reserve structure by increasing its holdings in the form of precious metals and oil by way of a safer investment strategy, a member of the National People’s Congress said.

“The government should not allow the reserves to go beyond the level of $2.8 trillion expected to be reached by year end and should cut overseas debt holdings and increase equity investments besides precious metals and oil,” Yin Zhongqing, Vice Chairman of the finance committee of the congress said in Shanghai today in a conference.

Workers at a parts plant of Toyota Motor Corp in China went on strike yesterday as higher wages-led unrest spreads beyond Honda. This strike comes on the wake of one at a Honda parts plant that ended giving time till today to the management, to arrive at a pay settlement.

The Toyoda Gosei Co plant in the northern city of Tianjin has been partially closed since yesterday as talks are ongoing with workers on pay hikes, said Shingo Handa, spokesman for Toyota. However production has not been affected in China according to the company’s spokesman in Tokyo.

Hong Kong has asked its regulatory and law enforcement authorities to look into the so called cancelled apartment sale at Henderson Land Development Co’s project at 39, Conduit Road, according to a government statement.

“The government firmly believes that all transactions involving private residential properties should be fair and transparent, and the government will not tolerate any non-bona fide and cooked transactions,” said the statement issued late yesterday.

Guangzhou Automobile Group Co, China’s sixth largest automaker, has applied to the Hong Kong stock exchange to begin trading 2.2 billion of its shares on the bourse from August 30, pending approval, the company said in a filing.

Guangzhou Auto is only listing its existing shares in Hong Kong by way of introduction and is not selling shares to outside investors or raising funds.

Shanghai Movers

China Vanke Co., Ltd fell 0.4% to 7.07 yuan after the company said will not consider shelving its development plans for the time being because of the strong demand of residential properties, the China Securities Journal reported, citing China Vanke CEO Yu Liang as saying.

Industrial and Commercial Bank of China Limited fell 1.4% to 4.17 yuan.

Poly Real Estate Group Co., Ltd fell 0.6% to 11.22 yuan.

Guangzhou Pharmaceutical Company Limited dropped 6.7% to 10.44 yuan.

Yunnan Baiyao Group Co., Ltd fell 1.1% to 62.22 yuan.

[HK Movers

The Bank of East Asia Limited rose 0.3% to HK$28.70 after the bank was downgraded to “sell” from “neutral” at Goldman Sachs Group Inc.

China National Materials Company Limited fell 0.4% to HK$4.33 after the provider of cement-making equipment and engineering services, also known as Sinoma, was upgraded to “buy” in new coverage by analysts at BNP Paribas.

Hang Seng Bank Limited closed unchanged at HK$104.30 after the lender was upgraded to “neutral” from “sell” by analysts at Goldman Sachs.

Victory City International Holdings Limited surged 14.2% to HK$1.76 after the producer and seller of knitted fabric and dyed yarn was upgraded to “outperform” in new coverage at Credit Suisse Group.