Oil Rise Fuels Inflation Fears in HK

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

Stocks in Hong Kong declined after a steep rise in oil stoked fears of inflation in the region. A surprise loss of nearly $3 billion also added uncertainty to the market. In Hong Kong trading the Hang Seng Index dropped 2.2% or 532.59 at 23,590.58, and the China Enterprises index of H-shares, or Hong Kong listed shares in mainland companies, declined 3% or 420.12 to 13,552.82. CNOOC gained 0.8% but PetroChina fell 2%.

[R6:00AM New York, 6:00PM Hong Kong- Resurgent oil prices and lingering fears of subprime losses adversely affect Hong Kong trading.[/R]

Hong Kong stock indexes plummeted on worries that near record oil prices at $100 a barrel will fuel inflation in the region. In addition, reports that KKR Financial Holdings had deferred a debt repayment due on February 15 to March 3 negatively affected investor sentiment. Credit Suisse reported a surprise asset write-down of $2.85 billion, second loss in as many weeks, added more uncertainty to the market.

Market Sentiment

In Hong Kong trading the Hang Seng Index dropped 2.2% or 532.59 at 23,590.58, and the China Enterprises index of H-shares, or Hong Kong-listed shares in mainland companies, declined 3% or 420.12 to 13,552.82.

Daily turnover on main-board was HK$89.7 billion compared to HK$78.9 billion yesterday.

Crude Oil Prices

Crude oil for March delivery rose by 4.7% to $100.01 per barrel yesterday on the worries that OPEC will cut output next meeting in March first week. Prices also increased after investors sought alternative investments to a falling dollar.

KKR Financial Holdings defers debt Payment

KKR Financial Holding LLC, ((KFN)) an affiliate of Kohlberg Kravis Roberts & Co, notified the U.S. Securities and Exchange Commission that a debt repayment due on February 15 on notes issued by conduits holding mortgage-backed securities has been deferred until March 3 and the other 50% is scheduled for payment on March 13. The recent deferment follows after the restructuring of loans in October of 2007 when, $270 million of debt payment of mortgage backed securities was deferred.

China uses $11.2 billion in FDI in January

Xinhua News Agency reported yesterday that China’s Ministry of Commerce that foreign direct investment jumped 109.78% from a year ago to $11.2 billion in January. China approvals for new projects declined in January by 13.41% from the same comparative period last year to 2,918 foreign funded companies.

For the year 2007, total foreign investment increased 13.6% last year to reach $74.77 billion.

China Securities Regulatory Commission Approves New Funds

China’s Securities Journal reported today that a new wave of stock fund issues and fund splits could inject Rmb80 billion into the stock market.

At the beginning of this month, China Securities Regulatory Commission approved two new closed-end stock funds issued by CCB Principal Asset Management Co. and China Southern Fund Management Co.

The CSRC had earlier suspended the launch of new funds last year on rising stocks on the domestic market.

The two funds are expected to raise about Rmb14 billion.

In addition, Bank of China Investment Management Co. Ltd. and AXA SPDB Investment Managers Co. have also been given the approval to launch new funds soon.

The Bank of China new fund would possibly raise Rmb10 billion, while AXA SPDB Investment Managers is likely to raise Rmb9 billion.

Gainers & Losers

Energy stocks rose after the prices of crude oil reached the $100 a barrel yesterday. CNOOC Ltd advanced 0.8 % to HK$12.78, but PetroChina Co Ltd declined 2.2 % to HK$11.70.

Zijin Mining rose 2% to HK$9.92, Xinjiang Xinxin Mining Industry Co Ltd jumped 2.3% to HK$6.69, Jiangxi Copper advanced 2% to HK$17.18 and Lingbao Gold gained 3.6% to HK$4.67.

Telecommunication stocks were however affected on profit taking after the recent rally. China Unicom dropped 4.1% to HK$18.38, China Mobile slipped 2.7% to HK$116 and China Telecom slumped 5.2% to HK$5.99.

Property stocks also fell as well. Cheung Kong Holdings declined 2.7 % to HK$116.90 and Sino Land fell 5% to HK$20.80.