Hong Kong Stocks Down 5.2%

123jump.com Staff
17 Mar, 2008
New York City

Stocks in Hong Kong fell sharply after the rescue of Bear Stearns at a fire sale price. Hang Seng index dropped 5.2% or 1,152 to 21,084. The news of the fifth largest bank liquidation in the U.S. over the weekend kept investors guessing for the next victims and impact on the exports from the region. Separately Hong Kong reported 2007 real GDP rose 11.4% and fourth quarter growth of 11.7%. Banks, properties, and telecom stocks fell sharply. Japan, India, and China indexes declined.

[R]6:00AM New York, 6:00PM Hong Kong - Credit market woes affects Hong Kong trading. Hong Kong’s real GDP rose 11.7% in the fourth quarter and 11.4% in 2007.[/R]

In Hong Kong trading the Hang Seng Index dropped 5.18% or 1,152.50 at 21,084.61, and the Hong Kong-listed shares in mainland companies, or H shares, fell 7.18% or 854.33 to 11,037.09.

Daily turnover on main-board was HK$94.4 billion compared to HK$88.3 billion on Friday.

Bear Stearns Bailout

JPMorgan Chase & Co. announced yesterday on its web site yesterday the acquisition of The Bear Stearns Companies Inc. after the Boards of Directors of both companies unanimously approved the stock-for-stock exchange transaction.

JPMorgan Chase will exchange 0.05473 shares of JPMorgan Chase common stock per one share of Bear Stearns stock and based on the closing price of March 15, 2008, the transaction would have a value of approximately $2 per share.

However, the value is at significant discount from $160 per share a month ago and $30 per share closing price on Friday. Market rumors for weeks suggested that the fifth largest U.S. investment bank is under liquidity crunch and clients are pulling accounts from the broker.

According to the press release, the Federal Reserve, the Office of the Comptroller of the Currency (OCC) and other federal agencies have given all necessary approvals.

Besides ordinary financing through the Discount Window, the Fed has also agreed to fund up to $30 billion of Bear Stearns'' less liquid assets.

Separately, the Financial Times reported that the Federal Reserve Bank and the Treasury pressed for the deal to be sealed before the opening of the Asian stock markets in order to forestall a run on European and Asian banks.

Hong Kong real GDP rises 11.7%

The Census and Statistics Department of the Hong Kong Special Administrative Region government reported last week that Hong Kong’s fourth quarter gross national product rose 14.6% to HK$465.3 billion.

However, in real terms GNP increased 9.4% and GDP growth during the period was estimated to have risen 11.7% to HK$447.2 billion.

For 2007, GDP jumped 11.4% from a year ago to HK$1.6 trillion.

Gainers & Losers

Financial stocks took a knock after JP Morgan Chase acquired troubled investment bank Bear Stearns for $2 per share stoking concerns of increased deterioration in the values of other financial companies.

Investors were also unnerved by the emergency move by the Federal Reserve Bank to cut the discount rate for banks by 25 basis points to 3.25%. HSBC Holdings Plc fell 4% to HK$118.10 and Bank of East Asia plunged 9% at HK$36.25.




Utilities gained after investors sought to hedge their position from the widening losses induced by the turmoil in the credit markets. Hong Kong Electric jumped 3.3% to HK$50.90 and CLP Holdings rose 1.1% to HK$65.30 as a result.

Oil refiner Sinopec Corp. fell despite UBS upgrading the stock on rising concern the company’s profit will be affected by the continued lid on refined oil products by the China government. The stock closed down 8.1% to HK$6.14.

Paper company, Nine Dragon fell the most since in twenty years after it reported below-forecasted- interim earnings. The company sales in the six months ended December 31 rose from Rmb4.6 billion to Rmb6.6 billion. Profits during the period also advanced to Rmb1 billion from Rmb975 million a year ago.

Nine Dragons rival Lee & Man plunged fell 26.8% to HK$12.20