HK Stocks Drop 2.3%, China Mobile Tumbles

123jump.com Staff
26 May, 2008
New York City

Hong Kong shares finished the morning trading session lower, dragged down by the index heavyweight China Mobile. Investors were reluctant to buy as they were worried that increasing fuel costs could accelerate inflation, slow economic expansion and cut profit growth. The Hang Seng index lost 424.32 points or 1.7% to end the session at 24,289.75. China''s largest offshore oil producer CNOOC lost 2.6% to HK$14.38. Air China, the nation''s largest international carrier, slid 1% to HK$5.36.

[R]6:00AM New York, 6:00PM Hong Kong - China Mobile drives Hang Seng down[/R]

Hong Kong stock indexes fell on heightened anxiety over the inflationary effects of rising oil prices. China Mobile also weighed on trading as a government restructure in the telecoms industry led to fears that the company’s margins will decline.

Market Sentiment

In Hong Kong trading the Hang Seng Index fell 2.37% or 586.76 to 24,127.31, and the China Enterprises Index of Hong Kong-listed mainland companies, or H shares, fell 3.04% or 415.13 to 13,221.28.

In Shanghai trading, CSI 300 Index dropped 3.15% or 115.93 to 3,559.22.

Daily turnover on main-board was HK$ 76.7 billion compared to HK$75.3 billion on Friday.

3G to be issued after restructure

China Daily reported today that the Ministry of Industry and Information Technology, the National Development and Reform Commission, and the Ministry of Finance jointly announced on Saturday the issuance of the 3G licenses will be done after the current restructure of the telecom industry.

The government also urged to China Telecom to buy China Unicom''s code-division multiple access (CDMA) network and China Unicom to incorporate with China Netcom.

Market watchers believe that the restructure might take four to six months due to difficulties in asset valuations.

China Mobile will be granted a 3G license based on the country''s home-made technology TD-SCDMA, while China Telecom and China Netcom will get theirs based on the WCDMA and CDMA2000 standard respectively.

China’s consumer price index to fall below 6% in second half

Xinhua News Agency reported today that JP Morgan Chase believes China’s high inflationary pressure will ease this year despite the recent earthquake that hit Sichuan Province.

JPMorgan chief China economist Frank FX commented: “The quake didn''t change our prediction on China''s consumer price index (CPI), whose year-on-year rise we think would gradually fall below 6 percent in the second half.""

China''s consumer price index increased 8.5% year-on-year in April, compared with 8.3% in March and a nearly 12-year-high of 8.7 % in February.

Lehman Brothers forecasted that China will see its annual GDP growth slow down to 9.8% this year and 8% in 2009, compared with 11.9%.

China’s demand and supply of fuel to balance by 2010

The Shanghai Daily reported today that China’s demand for and supply of fuel will balance by 2010 as producers are expected to shore up production to meet demand.

According to the chairman of China Coal Industry Association Wang Xianzheng, the nation''s annual demand for coal will be about 3 billion tons within the next three years, while the current supply of thermal coal to power plants was adequate.

Gainers & Losers

Goldman Sachs today cut its rating on China Mobile on Monday to “sell” from “neutral”, on speculation that the restructure will be hurt the company. China Mobile declined 8.15% as a result.

ZTE rose to 1.11% at HK$36.35, China Communications Services Corp advanced 0.44% to HK$6.80 on news the Beijing will issue 3G after an industry restructure.

However China Telecom, China Netcom and China Unicom have been suspended since the beginning of the re-organization on Friday.

China Life fell 3.8% after reporting that it will invest Rmb1.2 billion in capital into its property and casualty insurance subsidiary.

CNOOC slowed to 2.3% on profit taking after rising last week on the strength of rising oil prices. Crude oil prices increased 0.5% to $132.87 a barrel today.

PetroChina also plummeted 3.1% on fears the continued rally in crude oil pressure will put pressure on margins.

Property stock Sun Hung Kai Properties gained 1.8% to HK$125.70 after a Hong Kong court dismissed an application by its chairman, Walter Kwok, to prevent the board ousting him.