Telecom Worries Drag HK Indexes

123jump.com Staff
04 Jun, 2008
New York City

Hong stocks fell after investors worried that recent proposal to merge telecom companies may reduce earnings in the short term. Analysts wonder that the three-way deal among China Unicom, China Netcom and China Telecom may reduce earnings on higher operating costs in the short term. The Hang Seng Index fell 1.04% or 252.51 to 24,123.25 and in Shanghai trading CSI 300 Index fell 1.86% or 67.20 to 3,546.92.

[R]6:00AM New York, 6:00PM Hong Kong - Telecommunication stocks drag Hang Seng lower. Short term inflation expectations remain high.[/R]

Hong stocks fell after investors worried that recent proposal to merge telecom companies may reduce earnings in the short term. Analysts wonder that the three-way deal among China Unicom, China Netcom and China Telecom may reduce earnings on higher operating costs in the short term.

Market sentiment

In Hong Kong trading The Hang Seng Index fell 1.04% or 252.51 to 24,123.25, and the China Enterprises Index of Hong Kong-listed mainland companies, or H shares, dropped 1.73% or 236.22 at 13,385.76. In Shanghai trading CSI 300 Index fell 1.86% or 67.20 to 3,546.92.

Daily turnover on main-board was HK$78.91 billion compared to HK$83.9 billion yesterday.

China to stop export taxes refunds on vegetable oils

Xinhua News Agency reported that the Ministry of Finance said in a statement yesterday that China will stop refunding export taxes on some types of vegetable oils from June 13 in a bid to ensure domestic supplies and stabilize prices. The tax refund rate on vegetable oil exports has been 13% since September 2006.

Soybean oil, peanut oil, olive oil, palm oil, cottonseeds oil and corn oil are among 20 vegetable oil products that will be affected by the new dispensation. The Food and Agriculture Organization believes vegetable oil prices are expected to rise 50% in the next 10 years.

Last month Beijing initiated reducing import taxes on coconut oil and palm oil from 10% and 9% to 5% for imports.

Quake will have temporary inflationary effects in China

China Daily online reported today that according to a report compiled by the research unit of the People’s Bank of China the recent earthquake that hit Sichuan Province will temporarily add to China’s inflationary pressures, adding that the country’s economy will not suffer a hard landing.

According to the report, the quake will “push up the growth of fixed-asset investment in the post-quake reconstruction and increase the short-term inflationary pressure"".

The central bank notes that the value of economic output in the region affected by the disaster is only 0.25% of the national total. ""Inflationary pressures remain the biggest risk in the economy. Curbing price rises remains the government''s key task,"" explained the report.

Gainers & Losers

China Netcom fell 4.3% and China Netcom dropped 3.4% as market watchers observed that earnings from the proposed merger will be lower in the short term.

Energy stocks were also affected as oil prices fell below $124 per barrel after U.S. Fed Chairman Ben Bernanke intimated that present rates are appropriate for the economic growth.

CNOOC fell 4.1% to HK$13.26.Airlines however cheered falling oil prices. Cathay Pacific Airways climbed 2.4%. The Fed’s comments also weighed on homebuilders. Sino Land shed 2.6%, while Hang Lung Properties fell 2.7%.

Yanzhou Coal fell 8.9% after reporting that Shandong had cut prices of some thermal coal for the next three months. China Shenhua declined 4.9% and China Coal Energy fell 6.1% as a result.

Power producers also rose. Datang International Power gained 4.5% and Huaneng Power climbed down 2.9%.

Spanish lender BBVA said it will double its stake in Chinese bank CITIC and its Hong Kong-listed unit Citic International Financial Holdings. Chong Hing Bank advanced 3.7% and Dah Sing Banking increased 7.4 % on the news.

China Southern Airlines and Air France-KLM enter into JV

China Daily reported that China Southern Airlines and Air France-KLM Group signed an agreement yesterday to establish a cargo joint venture in which the former will hold 75% equity, while Air France will have the remainder. However, Air France will reserve the right to name the CEO. The JV, which is expected to be called AE Cargo, will operate 10 cargo planes in two years.