HK Stocks Advance, Shanghai Plunges

123jump.com Staff
01 Apr, 2008
New York City

Stocks in Hong Kong advanced tracking gains in international markets but stocks in Shanghai continue to fall. Shanghai stocks have suffered the most in the last five months of trading and retail investors are bearing most of the losses. Mainland investors are worried that Chinese government will not support the stock market. Fear of more declines is driving Shanghai stocks lower.

[R]6:00AM New York, 6:00 PM Hong Kong - World Bank slashes China economic growth to 9.4% for 2008. Airlines and refiners recover on a fall in crude oil prices.[/R]

Stocks in Hong Kong rose after falling oil prices occasioned by a cessation of hostilities in Iraq led to gains in realty stocks, airlines and oil refiners. However, gains were trimmed by $15 billion write-downs at Swiss Bank UBS AG.

Market sentiment

In Hong Kong trading Hang Seng rose 1.26% or 288.26 at 23,137.46, and the China Enterprises Index of Hong Kong-listed mainland companies, or H shares, increased 1.27% or 154.06 at 12,237.36.

In Shanghai trading, the CSI 300 plunged 5.5% or 207.68 at 3,582.86. Retail investors in China are selling stocks on rising fears that the government will not support the falling markets. Chinese stock index has lost more than 45% in the first quarter of 2008 and most of the losses are borne by retail investors who chased stocks in the last six months. A sharp and sudden decline in Shanghai listed stocks has shaken investors’ confidence in the market.

Daily turnover of main-board was HK$78.03 billion compared to HK$74.50 billion yesterday.

World Bank cuts China’s economic growth to 9.4%

Xinhua News Agency reported today that the World Bank cut its forecast for China''s 2008 economic growth to 9.4% from its forecast in February of 9.6%.

According to senior economist of the World Bank''s Beijing office Louis Kuijs, a rapid decline in global economy and worsening outlook for the U.S. markets for Chinese goods contributed to the lowered forecast. Kuijs added that the domestic economy is still healthy and investment and consumption will drive the economic growth.

The latest World Bank report """"East Asia and Pacific Update"""" stressed that domestic consumption and investment will play a key role in the economic growth in China but a slowdown in exports to the U.S. may affect overall growth. Exports to Middle East, Europe and Asia will sustain Chinese exports.

Also the bank projects growth in developing East Asia would fall by around 1% to 2% points to around 8.5% in 2008 due to the U.S. credit market crisis and the global slowdown.

Economies in the region reported a combined annual growth in 2007 of 10.2%, the most in a decade.

Local banks brakes on mortgages

The China Daily online reported today that China Banking Regulatory Commission said on Sunday the city’s banks must exercise caution on mortgage lending in order to curb speculation and stabilize property prices.

China is shoring efforts to tighten policy and cool the overheated property market despite property slowdowns and house price declines in Shanghai, Beijing and Shenzhen.

Last year CBRC raised the requirement for mortgage deposits for second-home buyers to at least 40%, with a 10% premium on the interest rate.

Gainers & Losers

Property stocks and airlines gained after on $4 decline in crude oil prices and a fall in base metals and precious metal prices. Refiners and airlines recovered some of the decline in the last three weeks on 6% decline in crude oil price in the last three days.

Sun Hung Kai Properties increased 2% to HK$123.80,Cheung Kong jumped 2.53% to HK$113.30 and Hang Lung rose 1.27% to HK$27.90.

Air China gained nearly 4% to HK$6.83, China Southern jumped 1.32% to HK$6.17 and Cathay Pacific rose 2% to HK$15.60. Sinopec closed up 2.4% to HK$6.82.

Gains were pared after Swiss bank UBS AG reported $19 billion in new write-downs.