Shanghai Index Drops; Gold Import Soars Five-fold

Chandrasekhar Atreya
03 Dec, 2010
New York City

Shanghai stocks traded lower and closed nearly unchanged and lost 1% in the week. Gold imports in the first ten months soared five-fold. China plans a shift in monetary policy stance in 2011 to contain inflation. GM, the first global automaker, sold 2 million cars in a year in China.

[R]5:00 PM Hong Kong, China – Shanghai stocks traded lower and closed nearly unchanged and lost 1% in the week. Gold imports in the first ten months soared five-fold. China plans a shift in monetary policy stance in 2011 to contain inflation. GM, the first global automaker, sold 2 million cars in a year in China.[/R]

The Shanghai Composite Index lost 0.04% or 1.18 to close at 2,842.43 and the CSI index gained 0.10% or 3.10 to close at 3,158.16. The weekly losses in the indexes were 1.02% and 1.15% respectively.

The Hang Seng Index in Hong Kong lost 0.55% or 128.26 to close at 23,320.52 and gained 1.94% for the week.

Inflation worries made China import five times more gold in the first ten months of the year than a year ago, according to data provided by Shanghai Gold Exchange.

Imports of gold rose to 209 tons compared with 45 tons in 2009, Shen Xiangrong, Chairman of the exchange, told a conference in Shanghai on Thursday. The demand for yellow metal has not dimmed despite the price rise of 27% this year.

China is now the world’s second largest market for diamonds boosted by the surging demand from expanding middle class.

“China’s appetite for the glittering stone is set to keep up its rapid expansion, backed by the growth in demand for the newly-weds, by government support and by economic growth in general,” said Li Mu, Deputy Director of the regulatory Diamond Administration of China.

Singapore’s sovereign wealth fund and OCBC are reportedly joining the bidders list for Morgan Stanley’s 34.3% stake in China International Capital Corp, the top investment bank of China.

Morgan Stanley will sell 5% stake to Great Eastern, the insurance arm of Singapore-based Overseas Chinese Banking Corp and the rest to the Government of Singapore Investment Corp, which holds 7.35% stake, Bloomberg News reported on Thursday.

China will shift its monetary policy stance from the current “relatively loose” level to “prudent” level next year, the Political Bureau of the Communist Party of China Central Committee decided today.

China should channel its savings into capital markets to avoid systematic financial risks and to nurture the growth of the financial sector, according to Li Daokui, an advisor to China’s central bank.

“Right now, we will address the issue by shifting from a loose monetary policy and slowing the growth rate of money supply as well as expand investment channels. Preventing systematic financial risks is the long-term challenge and more funds should be allowed gradually to be invested in overseas markets,” Li said in an interview with the People’s Daily on Thursday.

General Motors and its joint ventures in China sold a record 196,990 units in November, up 11.2% from a year earlier.

For the first 11 months of 2010, sales by GM and its joint ventures with SAIC Motor rose 32.7% annually to 2.17 million units. On November 4, GM became the first global automaker in China to sell 2 million vehicles in a year.

China Yangtze Power Co said it will invest $168 million to take a stake in the Russian utility EuroSibEnergo’s planned IPO in Hong Kong and also form a joint venture for power projects in Russia.

The Ministry of Finance said on Thursday that it will subsidize 50% of the contract value for producers of key components of photovoltaic power that won bidding for model projects in China.

The ministry, along with Ministry of Science, Ministry of Housing and Urban-Rural Development and the National Energy Bureau said in their joint statement that they will use fiscal grants to expand the utility of photovoltaic power in the country.

Stock Movers

Losses in consumer sector offset the gains in the photovoltaic power producer stocks to keep the index stagnant.

Baoding Tianwei Baobian Electric Co added 5% to 25.26 yuan and Leshan Electric Power Co added 4% to 14.73 yuan after the Ministry of Finance announced use of fiscal grants to increase the utility of photovoltaic power in the country.

Bright Dairy & Food Co dropped 2.7% to 10.28 yuan while Beijing Hualian Hypermarket Co was down 1.5% to 11.59 yuan.

China Vanke Co gained 2.7% to 8.49 yuan after reporting sales of 100 billion yuan as of December 1.

China Life Insurance Co, China’s largest insurer, added 1.6% to 22.85 yuan after stating its plan to invest 3 billion yuan in Guangdong Development Bank Co’s private placement to keep its stake at 20%.