China Region Stocks Rally; Consumer Confidence Slips

Chandrasekhar Atreya
18 Nov, 2010
New York City

China region stocks gained after falling for four days in a row. Hong Kong index surged 1.4% after U.S. retail sales rose and tighter restriction on mainland were perceived administrative and not restrictive. Consumer confidence drops in the third quarter for the first time in six quarters in China.

[R]5:00 PM Hong Kong, China – China region stocks gained after falling for four days in a row. Hong Kong index surged 1.4% after U.S. retail sales rose and tighter restriction on mainland were perceived administrative and not restrictive. Consumer confidence drops in the third quarter for the first time in six quarters in China.[/R]

China region and Honk Kong stocks closed higher tracking international markets and ignoring the revised tighter lending standards. U.S. retail sales rose more than expected setting up a rally in commodities and in Asian markets.

China region stocks fell more than 9% in the last four sessions.

The Shanghai Composite Index added 0.94% or 26.59 to close at 2,865.45. The CSI 300 Index rose 1.42% or 44.06 to 3,147.96. The Hang Seng Index in Hong Kong gained 1.82% or 422.93 to close at 23,637.39.

The mainland China now accounts for 41% of the global semiconductor consumption due to an increase in production of electronic devices such as mobile phones and computers, according to a report by PricewaterhouseCoopers.

Intel Inc, Dell Inc, Hewlett-Packard Inc and AMD Inc have decided to set up manufacturing units on the mainland to tap the booming demand.

PetroChina Co began to exploit its underground gas reserves to meet higher demand for winter heating in northern part of China. The company pumped 5.7 million cubic meters of gas from its Dagang Storage on Monday and 8 million cubic meters on Tuesday, according to a statement from its parent China National Petroleum Corp.

The Consumer Confidence Index in China dropped for the first time in six quarters to 104 in the third quarter from 109 in the second quarter, according to a joint study by the Economic Monitoring and Analysis Center under the National Bureau of Statistics and Nielson Co.

“Inflation, triggered by surging food costs, has become a major concern among consumers, especially low-income families,” said Pan Jiancheng, Deputy Director General of the Center.

As the nation makes discoveries of new reserves and as the output of gold rises in China, the need for imports of the metal is expected to drop, said Sun Zhaoxue, General Manager of China National Gold Corp on Wednesday.

“China’s gold output has been gradually rising and will continue to do so in the coming year, so imports could start to fall,” Sun told a conference in Tianjin on Wednesday.

Auto sales are expected to increase in the last two months in the current year as China prepared to add higher taxes on cars with larger engines.

The National People’s Congress, China’s top legislature, is reviewing a draft law to increase taxes on vehicles with engines over 1.6 liters and levy higher taxes on engines over 2.5 liters.

Demand for coal in China is expected to rise in the next five years and reach 3.8 billion tons, according to an official with the coal industry association.

This represents a jump of 800 million tons from 2009, Wang Xianzheng, head of China Coal Industry Association said in Beijing on Wednesday.

The shortage of iron ore supplies in China is expected to ease gradually with more domestic mineral discoveries and overseas acquisitions, according to an industry leader.

China’s iron ore output was set to exceed 1.3 billion tons in three to five years, said Zhou Zhongshu, President of China Minmetals Corp, at the China Mining Conference and Exhibition in Tianjin Wednesday.

Stock Movers

Air China Ltd closed up 2.6% at 13.21 yuan on the prospect of stronger yuan. The heavily levered airline has debts denominated in the U.S. dollars and the euro for the purchase of aircrafts.

Yanzhou Coal gained 2.8% to 26.5 yuan, after dropping to a four week low and Jiangxi Copper added 2.9% to 36.28 yuan.

SAIC Motor Corp gained the most of all auto makers with a rise of 4.9% to 18 yuan. The auto maker has agreed to take a stake of 1% in the largest public offering in the world of General Motors. The U.S. automaker increased the price and number of shares it offered to raise as more than $20 billion.

Food prices increase is prompting worries that government may intervene with price control and restrict price increase for large companies.

Beijing Sanyuan Foods declined 1.1% to 7.78 yuan and Tsingtao Brewery Co. dropped 0.28% to 34.82 yuan.