Hong Kong Surges 10%

123jump.com Staff
23 Jan, 2008
New York City

Hong Kong stocks surged in record one-day rally on substantial rate cut in the U.S. Hang Seng index soared 10% after dropping 14% in a two-day sell-off. Hong Kong Monetary Authority today cut its key rate to 5% from 5.75% in tandem with the U.S. Federal Reserve which slashed its benchmark rate o 3.5% from 4.25%. Banks, realty, and telecom stocks led the gainers. Hang Seng Index climbed from a two-day 14% decline to close up 11% or 2,332.54 to 24,090.17.

[R]6:00AM New York, 6:00PM Hong Kong - Hong Kong stock index surged 10% in record one day rise. Analysts predicted that the rally may falter in the weeks ahead.[/R]

Hong Kong stock indexes soared on record one-day rise led by financial and realty stocks after the U.S. Federal Reserve slashed its benchmark interest rate. The magnitude of the rate cut surprised the market. The sharp rise in the market averages may not sustain in the coming weeks if the U.S. economy continues to weaken.

In Hong Kong trading Hang Seng Index climbed from a two-day 14% decline to close up 11% or 2,332.54 to 24,090.17, the steepest ascent since 1998, while the Hang Seng China Enterprises Index rose 11% or 1,367.62 to 13,279.53, the most since September 1998.

Daily turnover on the main-board was HK$156.4 billion compared to HK$155.8 billion yesterday.

All stocks on the 43-member Hang Seng Index advanced.

Hong Kong Monetary Authority today cut its key rate to 5% from 5.75% in tandem with the U.S. Federal Reserve which slashed its benchmark rate o 3.5% from 4.25%.

HSBC Holdings, Standard Chartered Bank and the Bank of East Asia also cut rates by 75 basis points to 6%, sparking expectations that this will encourage economic growth.

Analysts at Credit Suisse and Celestial Asia Securities Holdings said today’s rally may be short-lived.

Realty stocks rose on expectations that demand for real estate in Hong Kong will rebound after the cut in the base rate by the U.S. Federal Reserve. Sun Hung Kai soared 9.3% to HK$154.90, Cheung Kong Holdings Limited climbed 10% to HK$130 and Hang Lung gained 9.9% to HK$29.50.

Financial stocks also rallied. Bank of Communications surged or 13% to HK$8.90 after reporting today that profit rose more than 60% in 2007, and earnings growth to Rmb 12.55 billion in 2006.

Bank of China added 8.1% to HK$3.33 after dismissing reports in The South China Morning Post newspaper that the bank may post a loss due to investments in subprime mortgages, adding that profits rose last year.

HSBC reversed a three-day 12% decline to close up 11% to HK$116.20.

Jiangxi Copper Co. plunged 19% to HK$16.60, its biggest drop since January 1998, after the shares ended a week-long suspension. The Company halted trading last week to announce a plan to sell Rmb 6.8 billion of bonds with warrants.

China Unicom surged 15% to HK$17.04 after Goldman Sachs lifted its rating on the stock from ``neutral,’’ to “buy. China Mobile, the world''s largest cellular operator rose 10.5% to HK$120.3

New World Development Co.''s public works and transportation arm, added 4.1% to HK$19.80. PetroChina Co Limited closed up17.5% to HK$11.


[R]5:00AM New York, 7:00PM Tokyo - Financial stocks, shipping lines and carmakers lift Tokyo up 2.04%.[/R]

Stocks in Tokyo recovered from their worst two-day decline in more than a decade buoyed by emergency rate cut in the U.S.

In Tokyo trading Nikkei 225 rose 2.04% or 256.01 to 12,829.06, while the broader Topix soared 29.98 to 1,249.93. Both benchmarks tumbled 5.7% yesterday and lost more than 10% in a two-day sell-off.

In the first section of the Tokyo Stock Exchange 10.3 billion shares worth 1.1 trillion yen were traded and in the second section 527 million shares worth 6 billion yen changed hands.

Of the Nikkei 225 stocks 187 gained, 30 declined, and 7 were unchanged. Bridgestone led gainers with a rise of 8.07% followed by Mitsubishi Corp rising 6.90% on rising metal prices.

The U.S. Federal Reserve cut the benchmark interest rate to 3.5% from 4.25% at an unscheduled meeting yesterday. The emergency rate cut of 0.75% was done in response to the slowing economy and global stock market plunge for two days ending on Tuesday.

It was the first time since 2001 the monetary authorities reduced the interest rate at an unscheduled meeting. The Federal Reserve was scheduled to meet on January 29-30.

Bloomberg news reported today that Obic net income in the nine months to December 31 rose to 8.5 billion yen, while sales jumped 6.5% to 35 billion yen on strong sales of accounting systems that accompanied the change of Japanese standards for booking depreciation and leases.

Of the Nikkei 225 index stocks, Bridgestone Corporation led advancers with a rise of 8.07% followed by rises in Mitsubishi Corp of 6.90%, in Fuji Electric House of 6.78%, in Marubeni Corp of 6.61%, and in Sumitomo Corp of 6.47%.

Mitsubishi Corp rose as metal prices gained. Copper gained 2.2% and zinc climbed 3.6%.

Other commodity stocks gained as well. Nippon Mining House increased 5.42% and Sumitomo Metal Industries soared 2.07%.

Shipping lines also gained on expectations that the aggressive emergency rate cut by the U.S. Federal Reserve will lead to a soft landing of the economy. Mitsui O.S.K. Lines gained 5.66%, Kawasaki Kisen rose 6.17% and Mitsui Engineering & Shipbuilding advanced 4.19%.

Toyota Motor Corporation surged 6.03% and Honda Motor Company increased 3.26%.

Casio Computer led decliners in Nikkei 225 index shares with a drop of 4.72% followed by losses in Clarion Company Limited of 4.10%, in KDDI Corporation of 2.92%, in Secom Company Limited of 2.81%, and in Sony Corporation of 2.74%.

Casio and other exporters fell after the yen strengthened from 106.41 to 106.43 against the dollar.

Takeda Pharmaceutical rose the most in five years after Citigroup raised its recommendation of the stock to “buy” on expectations that earnings will rise in the short to medium term.

The pharmaceutical company is currently seeking regulatory approval from the U.S. Food and Drug Administration on two development drugs with initial trial data are expected in May and June 2008.

Takeda is seeking a drug to replace Actos, which generated 2.86 billion yen in the year ended March 31, 2007. The stock closed up 6.33%.

Nikkei news online reported today that Nippon Yusen and Mitsui O.S.K. Lines will transform their crude oil tankers into iron ore carriers in preparation of a planned implementation of an international ban in using single-hull containers in transporting oil. Nippon Yusen rose 3.99% and Mitsui O.S.K. Lines surged 5.66%