Hong Kong Declines 5.4%, Leads Fall in Asia

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

Financial markets in Asia fell shaprly after service sector index showed a decline in activities in January. In Hong Kong trading Hang Seng Index fell 5.4% or 1,339.24 at 23,469.46, down 0.8% for the week, and the Hang Seng China Enterprises Index, Which tracks H share of mainland companies, slid 6.9 % to 13,067.11.

[R]6:00AM New York, 6:00PM Hong Kong - IMF revises Hong Kong economic growth estimate to 4.6%. Insurers pay Rmb680 million in losses related to snow storms.[/R]

Market Sentiment

Stocks in Hong Kong were hit by massive sell-off across the board before the market closed after the morning session for the Lunar New Year holiday. Worries over the U.S. economy that triggered losses in other Asian markets also negatively affected trading.

In Hong Kong trading Hang Seng Index fell 5.4% or 1,339.24 at 23,469.46, down 0.8% for the week, and the Hang Seng China Enterprises Index, which tracks ``H shares'''' of Chinese companies, slid 6.9 % to 13,067.11.

Daily turnover on main-board was HK$70.66 billion from HK$46.44 billion in yesterday’s morning session.

Economic Forecast

The Standard news reported today the IMF revised Hong Kong’s GDP growth estimate to 4.6% this year from rate of 6% in 2007 on the projection of falling demand from the United States and in Europe.

IMF observed that “the biggest risk to this outlook is a more-than-expected deterioration on external demand, especially in the U.S. and in Europe, and potentially further financial turbulence, both internally as well as domestically”.

According to the Fund, inflation will rise 3.7% this year from 2.2% in 2007.

Snow Storm Losses

Separately, the online edition added that the China Insurance Regulatory Commission reported that mainland insurance companies have paid an estimated Rmb680 million in compensation caused by the recent snowstorms.

In addition, Xinhua News Agency also reported today China has intensified relief efforts to the country’s southern, central and eastern regions in order ease price pressures during the forthcoming Lunar New Year holidays.

Economic losses from the snowstorms are currently estimated at Rmb80 billion.

Merger News Update

Commodities stock Chalco plunged 7% after BHP Billiton upped its bid for Rio Tinto International to $147.4 billion. Chinalco, the parent of Chalco, last week allied with Alcoa to purchase a 9% stake in Rio Tinto.

Gainers and Losers


Financial stocks fell in today’s trading on lingering sub-prime market turbulence. The International Commercial Bank of China declined 6.35% to HK$4.97, China Construction Bank fell 6.74% to HK$5.67, and HSBC shed 4.12% to HK$113.90.

Export-related companies also fell after a report in the U.S. showed that business activity in the non-manufacturing sector fell in January, sparking the fears of recession in the U.S.

Li & Fung, the largest apparel maker, declined 7.22% to HK$27.00 and retailer Esprit, which is reliant on the European market, fell 6.91%.



[R]5:00AM New York, 7:00PM Tokyo – Stocks in Japan fell after the U.S. recession fears intensified on a latest read on the service sector showed a decline in activities.[/R]

Stock indexes in Japan declined sharply after the sell-off in the U.S. markets and a weakness in European trading.

In Tokyo trading Nikkei 225 fell 4.7% or 646.26 to 13,099.24, and the broader Topix Index slipped 4.2% or 57.07 to 1,298.41.

Market Sentiment

In the first section of the Tokyo Stock Exchange 11.2 billion shares worth 1.2 trillion yen were traded and in the second section 319 million shares valued at 3.8 billion yen changed hands.

Of the Nikkei 225 stocks 7 rose, 217 declined, and 1 was unchanged. Clarion Co. Limited led gainers with a rise of 6.19%.

The U.S. Institute for Supply Management reported yesterday in its January 2008 Non-Manufacturing Report on Business that business activity in the non-manufacturing sector contracted in January for the first time in 58 months.

According to the index, the New Orders Index at 43.5% fell to the lowest since October 2001 and Employment Index declined the most since February 2002 at 43.9%.

The Employment Index fell to 70.7% indicating a decline in price increases in January.

Of the companies surveyed, only three reported growth while 14 recorded contraction.

“Members'' comments in January indicate that weakness in the economy coupled with increased costs have negatively affected their business. Members have also indicated that they are experiencing inflationary pressures,” as highlighted in the report.

Subprime Losses and Bond Insurers

Fitch Ratings announced on its web site that it had placed MBIA Inc. “AAA” rating on negative watch. The U.S. bond insurer provides insurance to municipal, state, and other regional government debt offering s for a fee. In the last five years the company had branched out to mortgage securities. However, a large number of mortgage bonds have lost value prompting heavy expenses at the insurer. The bond insurer has raised nearly $1 billion in new capital to bolster its balance sheet but investors worry that future subprime losses may leave the insurer with less capital and then adequate to pay for the insurance coverage.



Merger News Update

The Yomiuri online edition reported today that plans between Japan Tobacco and Nissin Foods Limited to merge their frozen foods units had collapsed amid accusations that Japan Tobacco had sold poisoned China made dumplings.

Under the deal, Japan Tobacco wanted to sell 49% equity in its frozen food unit Katokichi Co.

The yen declined from 106.38 to 106.43 against the dollar.

Gainers and Losers

Clarion Co. Limited led gains of the Nikkei 225 index shares with a rise of 6.19% followed by gains in Nikon Corp. of 3.08%, in Asahi Brewers of 2.50%, in NSK Limited of 2.09%, and Mitsubishi Heavy Industries of 1.60%.

Tosoh Corp. led decliners with a fall of 12.92% followed by losses in Mitsui & Shipbuilding of 12.30%, in Toho Zinc Limited of 11.15%, in Dowa Holdings Co. of 10.68%, and in Unitika Limited of 10.62%.

Earnings News

Nikon Corp. rose on the back of strong earnings results. The company reported net income grew 13% to 26 billion yen. Sales also jumped 14% from the previous quarter to 266.4 billion yen on strong sales of D3 and D300.

Mitsubishi Heavy Industries also gained as net income in the nine months jumped 41% to 54.2 billion yen from 38.5 billion yen on lucrative contracts to build ships.

The company also raised its full-year net income forecast to 60 billion yen from 54 billion yen. Operating profit is also forecasted to rise to 130 billion yen from115 billion yen.

Rohm Co, which is a parts supplier to Nintendo, cut its full-year annual profit target by 25%. Similarly, Orix Corp lowered its annual profit estimate by 16%.

Oil and Commodities Related

Shipping lines and commodity stocks also fell on speculation that the U.S. is in recession, a development that might lead to falling demand. Sumitomo Metal Mining shed 7.23%, Nippon Mining House declined 8.87%.

Energy stocks fell after crude oil prices for March delivery fell 1.9% to $88.41 per barrel yesterday.


Asian Markets Update

In Tokyo Nikkei 225 Index closed lower 646.26 or 4.70% to 13,099.24, in Hong Kong Hang Seng index decreased 1339.24 or 5.40% closed to 23,469.46, in Australia ASX 200 index lower 183.50 or 3.17% to close 5,609.40.

Thailand SET index closed lower 13.05 or 1.62% to 794.63, and Indonesia JSE Index edged decreased 65.16 or 2.41% to 2,639.09. Sensex index in India decreased 523.70 or 2.81% to 18,139.49. Market of South Korea was closed today.