Japan, HK Decline, China Rises

Ivaylo
26 Jun, 2007
New York City

Exporters in Japan fell with Elpida Memory and Fujitsu in the lead, while trading house Mitsubishi led the brokerages down on worries over subprime mortage rates in the US. HK, Australia and South Korea also declined. In China the market reversed losses made earlier as investors seemed to be of the opinion that the 12% slump previous week was overrated.

[R]9:00AM Asian markets mostly decline with China bucking the trend and gaining.[/R]

Asian markets ended mostly lower. The Nikkei 225 Average in Tokyo settled lower on weakness in brokerage house Mitsubishi, lower 2.4%, and on a decline in export-oriented stocks, which were hurt by the subprime mortgage rate concerns in the world biggest import market. Elpida Memory shed 3.3% and Fujitsu declined 1.5%. Sony, the biggest maker of game consoles in the world, lost 0.9%.

HK also ended lower as deals ahead of futures settlement this week weighed on stocks. The Hang Seng Index lost 0.3% and settled at 21,803. PICC tumbled 8% after Citigroup reduced its recommendation on the stock to sell from hold. Lenovo declined 6% after Deutsche Bank cut its rating to sell from buy and HSBC shed 0.1% on subprime mortgage rate concern.

Problems for small-cap stocks drove South Korean market lower. Small-caps suffered as country''s financial watchdog took steps to limit stock trading on credit by retail investors. Construction companies were also hit. Hyundai Engineering & Construction lost 2.3% and Daelim Industrial shed 1.4%. Seoul’s Kospi Index lost 0.5% to 1,749.

Other major markets around the region also declined. Australian S&P/ASX 200 lost 0.3% to 6,308 and Taiwan ended 0.5% lower at 8,865. In Australia, the biggest mining company in the world, BHP Billiton edged 0.4% lower, while Woodside Petroleum lost l.1% after Credit Suisse cut its rating to underperform.

China bucked the downtrend. The Shanghai Composite Index gained after declining for two sessions in a row. The index advanced 0.9% to finish at 3,973. Shipping company China Cosco Holdings rallied 93.2% in its Shanghai trading debut as traders were upbeat about its possible expansion. Huangshi Dongbei Electrical Appliance soared by the daily 10% limit.

[R]8:00AM NY-7:00PM Mumbai Sensex ends virtually flat in a subdued trading.[/R]

The Sensex on BSE finished 13.36 points higher, or 0.09%, at 14,501.08.

The market-breadth was strong with almost three gainers for every two decliners. As 1,492 stocks advanced, 1,117 declined and 84 remained unchanged. Of the 30 stocks in the Sensex, 15 advanced, 14 declined and one was unchanged. The turnover on BSE was Rs 4,677 crore, higher than Rs 4,316 crore on Monday. On NSE, the turnover was Rs 9,557 crore and was also much higher than Rs 8,308 on Monday.

Economic news

After the State Bank of India announced that it may have to raise $12 billion in the next three years to meet growing loan demands and meet capital requirements, the risk of holding debt of the lender advanced to a three-month high. SBI will use the money to expand its operation in the domestic and international markets. Credit-default swaps based on $10 million of the company''s debt advanced 4% to $50,000 from $48,000 yesterday. Any rise in the price of debt indicates the investors’ increased skepticism of the capacity of the bank to repay its debt. The bank said that plans to raise $1.2 billion by the end of this year.

The risk for holding debt in another Indian bank ICICI bank also increased to a six-month high as the bank failed to secure an important government approval to sell a stake of its unit. Credit-default swaps based on $10 million of the company''s debt advanced 3% to $70,000 today after surging 4.5% yesterday to almost $68,000.

Trading highlights

Time Technoplast was the most active stock with a turnover of Rs 201 crore followed by Indiabulls Financials and Indiabulls Real Estate.

Advancers

ONGC and Bharti Airtel surged 2% each to Rs 936 and Rs 850, respectively. ONGC reported a 13% decline in net profit to Rs 2,681.64 crore in the fourth-quarter of fiscal 2007 compared to a net profit of Rs 3,085.89 crore in the same period a year ago. Total income advanced nearly 10% to Rs 15,400 crore in fiscal 2007, compared to Rs 14,200 crore in the year ago period.

Bharti Airtel advance was on sustained buying after HSBC raised the price target of Bharti Airtel by 9%, and added that the company will continue to expand market share.

State run engineering large-cap BHEL gained 1.4% to Rs 1,471 as the company secured an order worth Rs 106 crore from Rashtriya Ispat Nigam. Grasim gained 1.4% each to Rs 2,496 and Tata Motors advanced over 1% to Rs 684. Satyam Computers was the only It large-cap which advanced rose 0.4% to Rs 456.

Decliners

Ranbaxy dropped 2.4% to Rs 348 as it was allegedly involved in a cartel of fixing drug prices. Profit taking weighed on cement stocks. Gujarat Ambuja Cements lost 1% to Rs 116 and ACC dipped 1.2% to Rs 846. IT stocks advanced on a weaker rupee until the last hour of trading when they declined. TCS was down 0.3% to Rs 1,122, Infosys Technologies sank 0.7% to Rs 1922, and Wipro lost 1.3% to Rs 509.