Hang Seng Recovers 3.7% in Asia Rally

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

Fiscal surplus in Hong Kong is expected to rise to HK$100 billion according to a forecast from the Taxation Institute. The largest surplus since 1999, prompted demands to lower property and other taxes. Bear Stearns and Citic have agreed to lower the price of investment in each other after the recent market slide. Hong Kong stocks gained on the resurging markets across Asia. Shipping lines surged on a rise in the freight price index.

[R]6:00AM New York, 6:00PM Hong Kong - Hong Kong’s Taxation Institute forecasts fiscal surplus of HK$100 billion. CITIC and Bear Stearns will reduce the stock price of investment in each other and raise stakes in each other.[/R]

Market Sentiment

In Hong Kong trading the Hang Seng Index rose 3.7% or 852.13 at 24,021.68, and the China Enterprises index of H shares, or Hong Kong-listed shares in mainland companies, gained 4.7 % or 601.61 to 13,550.99.

Stocks gained after Japan’s fourth quarter GDP growth beat analyst estimates and on an unexpected rise in the U.S. retail sales in January.

Daily turnover on main-board was HK$94.3 billion compared to HK$82.5 billion on Wednesday.

Fiscal Surplus Projected to Rise

The Standard news online reported today that the Taxation Institute of Hong Kong said it forecasts fiscal surplus for the current financial year to rise to a record HK$100 billion from the current HK$86.8 billion.

The institute also urged the government to provide tax relief, retain stamp duty and broaden the tax base after """"the biggest bonanza year"""" since 1999.

The institute proposed a one year waiver of taxes for both residential and non-residential premises for the fiscal year beginning in April, subject to a maximum of HK$5,000 per quarter per unit.

Other proposals that were made by the institute also include broadening the margin tax band width to HK$40,000 from HK$35,000. The institute projected that stamp duty contribution may be as high as HK$40 billion

Bear Sterns and CITIC to revise deal

The China’s People Daily reported today that Bear Stearns and CITIC Securities will review a share swap deal and increase the stake in each other by lowering convertible prices of each share without changing the fixed investment scale.

After the price cut CITIC’s stake in Bear Stearns will increase from 6% to 9.9%, while the U.S. company’s 1 billion debt will translate into a 2.5% equity in CITIC, which will eventually rise to 7.5%.

The deal is still subject to regulatory approval.

Gainers and Losers

Shipping lines advanced after the Baltic Dry Index, which is used to gauge freight charges, gained. Reuters news also reported that negotiations for this year’s iron ore supply were at an advanced stage.

COSCO increased 10.1% to HK$23, Pacific Basin Shipping Limited gained 5.5 % to HK$12.68, and China Shipping Development Co Limited spiked 10% to HK$23.15

Commodities stock Chalco edged up 9% to HK$13.36 on the speculation that its parent company China Aluminum Company and the U.S. ally Alcoa plan to raise their stake in Rio Tinto to 20% from 12%.

Angang Steel spiked 10.8% to HK$16.56 on speculation it will benefit from the rebuilding effort in China after snowstorms caused economic damage worth $15 billion.

Also Alibaba.com rose 4.7% to HK$19.96 after Baidu.com said fourth quarter profit gained 79% on the year to Rmb219.8 million.

Company News

Baidu.com Inc’s fourth quarter profit increased 79% from a year ago to Rmb219.8 million. Online marketing revenues increased by 111.2% from a year earlier to Rmb569.6 million.

Full-year net profit jumped 108% to Rmb629 million and revenues increased by 110% to Rmb1.74 billion.


[R]5:00AM New York, 7:00PM Tokyo - Japan’s fourth quarter economic growth increases to 0.9% from 0.8% in the third quarter.[/R]

Stocks in Japan rebounded after the economic growth in the fourth quarter exceeded expectations and better than expected January retail sales in the U.S. Earnings from Nippon Sheet Glass also helped market sentiment.

Market Sentiment

In Tokyo trading Nikkei 225 rose 4.27% or 558.15 to 13,626.45, and the broader Topix Index increased 3.7% or 47.09 to 1,332.44.

In the first section of the Tokyo Stock Exchange 9.1 billion shares worth 1.05 trillion yen were traded and in the second section 278 million shares valued at 314 billion yen changed hands.

Of the Nikkei 225 stocks 222 gained and 1 declined. Sumco Corp. led gainers with a rise of 13.98% followed by Taiheiyo Cement increasing 12.92%.

Fourth Quarter GDP Rises

The Cabinet Office reported today in the preliminary figures for fourth quarter GDP growth that the country’s gross domestic product increased to 0.9% from 0.8% in the third quarter.

In real terms, the domestic market contributed 0.5%, while exports contributed 0.4% and in nominal terms the domestic market contributed 0.2% and net exports added 0.5%.

According to the Cabinet Office, private consumption rose to 0.2% from 0.1% in the previous quarter in real terms and advanced 0.4% from zero growth in nominal terms in the third quarter. Household consumption also rose by the same figures both in real and nominal terms.

Fourth quarter private residential investment declined in real terms to 9% from 8.3% decline in the earlier quarter. Similarly, in nominal terms investment in the sector fell to 9.3% from a decline of 8.2%.

Conversely, non-residential real investment rose to 2.9% in the fourth quarter from 1.1% in the third quarter, while it jumped in nominal terms to 2.7% from 1.3% from the previous quarter.

Public demand also rose as well in the three months to December from 0.1% to 0.8% in real terms and gained 0.3% from 0.2% in nominal terms.

Furthermore, declines in public investment slowed to a loss of 0.7% from a fall of 1.9% in the quarter earlier period in real terms. In nominal terms, it also narrowed to a loss of 0.4% from a loss of 1.6%.

Exports in the fourth quarter were unchanged at 2.9% in real terms, but fell marginally to 1.7% from 2% a quarter ago in nominal terms.

Imports increased to 0.5% in real terms from a decline of 0.1% in the previous quarter and gained 3.5% from 0.1% in the previous quarter in nominal terms.

U.S. Retail Sales Unexpectedly Rise

The U.S. Commerce Department reported yesterday that retail sales rose 0.3% in January. Economists were expecting a fractional decline. Higher sales of gasoline, apparel, and automobiles lifted retail sales. Economists are still expecting retail sales to decline in 2008 as consumers battle rising food and energy prices, stagnant wages, falling home values, and tight credit markets.

Construction Machinery Set to Increase

Japan’s Construction Equipment Manufacturers Association shipments of excavators, tractors, cranes and other construction machinery may rise to 2.6 trillion yen in the fiscal year beginning in April. In the fiscal 2007, the industry recorded a sale of 2.35 billion yen and exported 66% of its production.

The Chairman of the association, Hiroo Shimada said in a message for the New Year and published on the association’s website, “Demand in North America alone decreased by almost 20% over the previous year, affected by a reduction in housing starts. On the other hand, demand in China increased by 40%; the markets in India, the Middle & Near East and Russia also expanded; and demand in Europe steadily increased. The world market, as a whole, grew substantially.


Yen Gains

The yen gained 1.03% to 108.29 from 108.32 against the dollar.

Gainers and Losers

Sumco Corp. led gainers in the Nikkei 225 index stocks with a rise of 13.98% followed by gains in Taiheiyo Cement of 12.92%, in Nippon Sheet Glass of 11.83%, in Advantest Corp. of 11.61%, and in Pioneer Corp. of 10.60%.

Advantest Corp rose after Applied Computers projected higher demand in the next quarter.

Nippon Sheet Glass advanced after income in the nine months ended December 31st increased from 28.2 billion yen to 60.8 billion yen driven mainly by increased sales in Europe as the sales from Pilkington Plc were added to the company sales. Sales in the same period edged up 34% to 648.7 billion yen from a year ago.

Sky Perfect JSAT led decliners in the Nikkei 225 index shares with a drop of 2.27% followed by a loss in Shiseido Co. Limited of 1.83%.

International Markets

In Tokyo Nikkei 225 Index closed higher 558.15 or 4.27% to 13,626.45, in Hong Kong Hang Seng index increased 852.13 or 3.68% closed to 24,021.68. Australia ASX 200 index increased 142.70 or 2.57% to close 5,684.80.

In South Korea Kospi Index increased 65.67 or 4.02% to close at 1,697.45, in Thailand SET index closed higher 2.70 or 0.33% to 832.11 and Indonesia JSE Index increased 64.86 or 2.48% to 2,675.65. Sensex index in India increased 817.50 or 4.82% to 17,766.63.