Yuan Rises, Stocks Fall

123jump.com Staff
05 Feb, 2008
New York City

Stocks in Hong Kong edged lower on a shorter trading session ahead a week of holiday for Lunar New Year. Hang Seng fell 0.9% or 223.38 to close at 24,808.70 and China Enterprises index of H-shares slumped 0.57% to 14,040.68.ICBC Bank has gained approval of shareholders and South African regulators for its stake in Standard Bank.

6:00AM New York, 6:00PM Hong- Chinese yuan rise to record at 7.1846 against U.S. dollar[/R]

Stocks in Hong Kong declined on profit taking before the markets close for the Lunar New Year holidays and concern on the deterioration of the global economic outlook. Shipping lines, realty stocks and financial institutions fell as a result.

In Hong Kong trading the Hang Seng Index dropped 0.89% or 223.38 to 24,808.70, and the China Enterprises index of H-shares slumped 0.57% to 14,040.68.

Daily turnover on main-board was HK$85.03 billion compared to HK$117.6 billion yesterday.

Hong Kong trading will close after the morning session tomorrow and will be opened again on Monday next week.

The China People’s Daily online edition reported that the International Commercial Bank of China has been given regulatory approval to acquire 20% equity in South African bank Standard Bank for $5.46 billion.

Shareholders from both financial institutions have approved the transaction, and the South Africa Registrar of Banks and the Johannesburg Securities Exchange have also sanctioned the deal.

Separately, the online publication reported that a Lishui municipal intermediate people’s court in the eastern Zhejiang Province yesterday jailed former securities director of Shanghai listed Hangxiao Steel Structure Chen Yuxing and slapped two accomplices with a fine of Rmb 80.74 million for insider trading after recovering illegal gains of Rmb 40.37 million worth of illegal gains.

Financial stocks declined on profit taking. China Life fell 1.09 % to HK$31.90 and China Construction Bank shed 1.94% to HK$6.08.

Shipping lines fell on speculation the global economic growth is slowing. China Shipping Development lost 5.33% to HK$21.30 and China Shipping Container Lines slipped 4.27% at HK$3.14.

Realty and mining stocks traded lower ahead of the Lunar New Year holidays. New World Development declined 5.34% to HK$22.15 and Cheung Kong slid 2.07% to HK$123.30.

Also of Jiangxi Copper Co Ltd edged down 2.76 % to HK$15.48.

UBS reported yesterday that the telecommunications were unlikely to be highly profitable in the short-term as a restructure in the industry was likely to delay the launch of third generation mobile services. China Telecom dropped 0.5% and China Netcom shed 3.35% as a result.

Retailer Li & Fung, which relies on North America for its products, shed 5.21% at HK$29.10 on the economic worries in the U.S.

Sinopec gained 2.13% to HK$9.59 after crude oil for March delivery climbed down 0.9% to $89.60 per barrel.


[R]5:00AM New York, 7:00PM Tokyo – Weaker than expected corporate earnings dragged market index lower. Toyota, Sanyo Electric, Yamaha Motor, and Mitsubishi Estates reported earnings.[/R]


Stocks in Japan traded in negative territory on weaker corporate results announced to the market.

Market Sentiment

In Tokyo trading Nikkei 225 declined 0.82% or 114.2 to 13,745.50 while the broader Topix Index fell 0.7% or 9.24% to 106.97.

In the first section of the Tokyo Stock Exchange 9.5 billion shares worth 1.1 trillion yen were traded and in the second section 516 billion shares valued at 4.8 billion yen changed hands.

Earnings News

Toyota Motor Corp reported today that third quarter net income rose 7.5%n to 458 billion yen from 426 billion yen a year ago and forecasted that full-year net revenues will climb 6.5% to 25 trillion yen. Net income is also projected to rise 3.4% to 1.7 trillion yen. Toyota stock fell as much as 4.8% in the late afternoon trading.

Yamaha Motor Corp announced today that its net sales for the fiscal year ending December 31 rose 11% to 1.7 trillion yen, while operating income increased by 2.8% to 126 billion yen from 123 billion yen a year ago.

The net income however fell 7.8% to 71.2 billion from 77.2 billion a year earlier. Yamaha forecasts that for the fiscal year ending December 31, 2008 will plunge 17.2% to 59 billion yen. The stock closed down 0.23%.

Mitsubishi Rayon Co declined after the company slashed its annual profit target by 30%. Sumitomo Chemical Co said it had only achieved 63% of its full year operating profit target.

Metals and Commodities

Of the Nikkei 225 stocks 95 gained, 122 declined, and 8 were unchanged. Itochu Corp. led advancers with a rise of 6.15% followed by Konami Corp gaining 5.54%.

Crude oil prices continued to fall on speculation that U.S. inventories increased to 2.2 million barrels last week.

Crude oil for March delivery fell 0.5% to $89.60 per barrel, while contract prices gained 1.2% to $90.02 per barrel yesterday. Nippon Oil Corp slipped 4.80% as a result.

Platinum prices extended gains from last week and rose 0.6% to 5,900 per gram on the Tokyo Commodities Exchange and platinum for immediate delivery jumped 0.4% to $1,805 an ounce on expectations that output from South Africa will continue to decline on power rationing.

Sumitomo Metal Industries rose 1.19% and Sumitomo Metal Mining advanced 2.76%.

Merger News

The Japan Times online edition reported today that Sapporo Holdings Limited announced in a statement that its panel, consisting of one lawyer and two outside experts, had judged that the Steel Partners Japan’s buyout proposal will hurt shareholders.

The panel believes that “the buyout plan is highly likely to hurt Sapporo Holdings Limited corporate value and it would be extremely harmful to the common interest of shareholders.”

Steel Partners recently proposed a tender offer to raise its stake 66.6% from the 17.52% equity it currently holds if the brewer’s board of directors approved the move.

The yen advanced 0.24% from 106.97 to 106.95 at the close of trade.

Gainers and Losers

Itochu Corp. led advancers of the Nikkei 225 index shares with a rise of 6.15% followed by rises in Konami Corp. of 5.54%, in Yahoo Japan Corp. of 5%, in Japan Tobacco of 4.91%, and in Denki Kagaku of 4.23%.

Mitsubishi Rayon Co. led decliners of the Nikkei index shares with a fall of 17.14% followed by rises in Olympus Corp. of 13.89%, in Sapporo Holdings of 6.87%, in Konica Minolta Holdings of 6.81%, and Sumitomo Realty of 6.09%.

Asian Markets

In Tokyo Nikkei 225 Index closed lower 114.20 or 0.82% to 13,745.50, in Hong Kong Hang Seng index decreased 223.38 or 0.89% closed to 24,808.70, in Australia ASX 200 index lower 74.50 or 1.27% to close 5,792.90.

In South Korea Kospi Index increased 6.44 or 0.38% to close at 1,696.57, in Thailand SET index closed lower 3.88 or 0.48% to 807.68, and Indonesia JSE Index edged increased 2.62 or 0.10% to 2,704.25. Sensex index in India increased 2.84 or 0.02% to 18,663.16.

[R]3:00AM New York, 7:00PM Sydney- Australia increased rates by 0.25% to 7%.[/R]

ASX 200 index lost 1.3% or 74.5 to close at 5,792.90.


The Preliminary market turnover was 1.59 billion shares worth $5.47 billion, with 422 stocks moving up, 765 stocks moving down and 344 unchanged.

Reserve Bank of Australia Hikes Rates

The Reserve Bank of Australia lifted the official cash rate by 25 basis points to 7%. The accompanying statement from the Governor Glenn Stevens suggested that the inflation is running above the bank’s target. The statement highlighted, “But given the extent of pressure on capacity and the build-up in inflation, a significant slowing in demand from its recent pace is likely to be necessary to reduce inflation over time.

The Board took careful note of recent events abroad and developments in financial markets. The world economy is slowing and it now appears likely that global growth will be below trend in 2008. Recent trends in world commodity markets suggest, however, that Australia’s terms of trade are likely to rise further.”

Australia''s largest mortgage lender, Commonwealth Bank of Australia and others immediately passed the increase in rates to borrowers. The bank lifted the 12-month introductory rate available to new customers on its TeleNet Saver and Business Telenet Saver by 30 basis points each to 7.50% and 7.15% respectively.

National Australia Bank said it had not yet decided whether to lift its interest rates. BankWest lifted the interest rates on its deposit products after the RBA''s announcement.

News Corp Earnings

News Corporation today reported second quarter net income of $832 million or $0.27 per share compared to $822 million or $0.26 per share on a diluted combined basis in the second quarter a year ago.

Revenue in the second quarter increased to $8.59 billion from $7.844 billion, an increase 0f 9%. For the first half revenue increased to $15.6 billion from $13.75 billion and earnings increased to $1.56 billion from $1.665 billion.

Cable Network Programming operating income up 23% despite launch costs for the Fox Business Network and the Big Ten Network. Growth was led by gains at the Fox News Channel, the Regional Sports Networks and Fox International Channels.

SKY Italia generated operating income of $62 million, an improvement of $74 million versus a year ago, reflecting net subscriber additions of 400,000 over the past 12 months as the subscriber base expands to 4.43 million.

Television operating income more than doubled, increasing $133 million, as ratings improved and increased pricing fuel advertising growth at the FOX broadcast network.

Filmed Entertainment delivered operating income of $403 million on strength of home entertainment titles and successful theatrical release slate.


Qantas Averts Strike

Qantas Airways Ltd today announced the finalization of 14 months of talks with its engineers 3% increase in annual pay backdated to January 2007. The engineers had been asking for a 5% pay increase.

The company also agreed to make greater company contributions to pension funds. The airline will increase pension contributions to at least 10% of workers'' salaries, 1% above government-mandated minimum of 9% and change the number and spread of part- time employees.

The company said the deal was subject to a formal vote of the Australian Licensed Aircraft Engineers Association''s 1,600 workers at Qantas. The airline has more than 5,000 domestic flights a week to 57 destinations.

Qantas shares fell 2.1%. Qantas last year indicated that it was expecting record profits after flying more domestic passengers. Pretax earnings were due to rise by 40% to $1.44 billion for the year ending June.

Consolidated Media Merger Update

Consolidated Media Holdings Ltd says it would open its books to its suitor to allow it to conduct due diligence. Illyria, which is owned by Lachlan Murdoch and its equity partners, are seeking to form a 50/50 joint venture with Cons Media shareholder, James Packer’s Consolidated Press Holdings. They have offered $3.3 billion in cash and stock for the company.

Gainers and Losers

Of the ASX 200 index shares, Boom Logistics led the gainers with a rise of 8% followed by increases in Macarthur Coal of 5.4%, in Sunland Group of 3.6%, Queensland Gas in of 3.2%, and in Singap Telec of 3%.

Of the ASX 200 index stocks, Valad Property led the decliners with a fall of 18% followed by losses in AED Oil Limited of 10.1%, in Centro Retail of 9.6%, in Centro Properties of 9.3% and in Bradken of 8.1%.

Mitsubishi Plant Closure

About 1,000 Mitsubishi Australia workers will be jobless next month after the company announced today that it will close its Adelaide factory at the end of March.

Mitsubishi management told reporters that the closure of the Tonsley Park factory is a commercial decision, forced by the high Australian dollar and falling sales for the Adelaide-built Mitsubishi 380 model.

The Federal Government announced a $50 million package to help Mitsubishi workers affected by the closure of its South Australian plant. The $50 million package is made up of $35 million from the Federal Government, $10 million from the South Australian Government and Mitsubishi would contribute $5 million.

BHP Earnings Estimate

Analysts have indicated that they are looking forward to a strong interim profit announcement by mining giant BHP Billiton tomorrow. The interim results were expected to eclipse the previous corresponding result of $6.84 billion. Analysts’ earnings forecast range from the low of $6.9 billion to $8.8 billion.

ABN Amro analyst Warren Edney told reporters that he was forecasting a profit of $6.99 billion ($6.3 billion) and that investors would be looking for an update by the resources giant on impact of flooding in Queensland on its coal operations and power issues in South Africa.

Heavy rain in central Queensland forced the closure of a number of coal operations last month, while electricity shortages in South Africa have disrupted mining and smelting operations.


Murchison Bid for Midwest Expires

Murchison Metals Ltd has thrown in the towel in its $900 million takeover bid for Midwest Corporation Ltd. The company has however said it would not be averse to a counter offer by its rival.

Murchison managing director Trevor Matthews told reporters that the company would also consider a scrip-based merger as their shareholders would still participate in a much bigger asset base and a much bigger, more certain development.

Murchison''s bid expired on Tuesday, leaving it with a 4.8% stake.

Matthews also said that the company was considering divesting its stake in Midwest but cast doubt over the success of China''s Sinosteel Corporation bid. Sinosteel has offered to buy Midwest for $1.19 billion. Murchison closed up two cents to $3.98, while Midwest finished down 17 cents to $4.95.

Global engineering services provider, Ausenco Limited today announced that it has agreed to acquire multi-discipline engineering services business, the Pipeline Systems Incorporated group.

PSI has the leading global position in the design and delivery of slurry pipeline transport systems including long distance slurry pipelines and tailings disposal systems. The acquisition complements Ausenco''s mining and minerals processing engineering services business and provides diversification into the process infrastructure-engineering sector.

Australian Dollar - Unchanged

The dollar closed firmer but off its overnight highs as today''s interest rate hike by the domestic central bank garnered little response from investors. At the close the Australian dollar was trading at US$0.9074/77, up from yesterday''s close of US$0.9047/52.