Bearish Sentiment Persists in HK

123jump.com Staff
03 Jul, 2008
New York City

Hong Kong market averages declined for the fourth day in a row led by weak financial stocks on fears of widening credit market losses. Hang Seng reached its peak in November of 31,638.22 and since then has steadily declined in the last seven months of trading but the index is still trading above August low of 20,387.13.

[R]6:00AM New York, 6:00PM Hong Kong – China prepares to monitor and cut speculative fund flows. Capital raised on the Chinese stock markets may fall 50% this year.[/R]

Hong Kong market averages declined for the fourth day in a row led by weak financial stocks on fears of widening credit market losses. Hang Seng reached its peak in November of 31,638.22 and since then has steadily declined in the last seven months of trading but the index is still trading above August low of 20,387.13.

Hang Seng Down 33% from November Peak

In Hong Kong trading the Hang Seng Index fell 2.13% or 461.67 at 21,242.778, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, declined 4.04% or 469 at 11,139.92.

In Shanghai trading CSI 300 Index rose 2.26% or 61.02 at 2,760.61.

Daily turnover on main-board was HK$75.8 billion compared with HK$76.3 billion yesterday.

IPO Sentiment Weak

China Daily online reported on its website that PricewaterhouseCoopers said in a report yesterday that capital raised in the initial public offering in China and Hong Kong are likely to fall 50% in the current year.

The cumulative funds raised in Shanghai and Shenzhen stock exchanges has declined 41% from a year ago to Rmb 89.8 billion in the first half of the year and in Hong Kong number of IPOs in the first half of dropped to 23 from 34 a year ago.

PwC forecasts that IPO funds raised on the mainland and in Hong Kong markets will rise to Rmb250 billion and HK$130 billion in 2008 respectively.

Investors hope that in the second half companies will raise Rmb160.2 billion on the mainland and HK$79.7 billion in Hong Kong.

PwC Beijing office lead partner Charles Feng said, “Besides stock market volatility and China''s austerity measures, the heavy snow last winter and the recent earthquake have had a certain impact on the economy. Many companies have chosen to postpone their flotation plans as they are not in need of cash and want to wait until market conditions improve.""

More Companies Improve Accounting Controls

A separate survey from accounting firm Deloitte published yesterday showed that number of companies with tight internal control rose to 44% of all listed companies, twice the number a year ago.

China Turns Screw on Hot Money

State Administration of Foreign Exchange of China said today three Chinese central governmental departments will link their internal systems beginning next week to monitor foreign exchange receipts and export settlements.

SAFE will work with the Ministry of Commerce and the General Administration of Customs to implement additional monitoring of so called ‘hot money’ that speculates on the direction of Chinese currency. At the end of May China’s foreign exchange reserves rose to US$ 1.79 trillion.

Economists estimate that $147.9 billion of speculative funds flowed into the country in the first five months through over-invoiced exports, over-stated foreign direct investment and underground private banks.

The additional monitoring by SAFE will cut the short-term global speculative funds flows.

Gainers & Losers

HSBC fell 0.8% in cautious trading ahead of the European Central Bank interest rate decision. Hang Seng Bank declined 3.8% and Bank of East Asia shed 4.1%.

Ping An Insurance plunged 8.6% on speculation that the company might be implicated for tax evasion. However the company denied the rumors saying the authorities were checking its tax records from 2004 to 2006. Rival China Life dropped 3.6% as well.

CNOOC slumped 4% on profit taking despite crude oil rising above $144 a barrel.

Retailer Esprit Holdings increased 2% after reporting that retail sales in Germany, the company’s niche market, rebounded in May.

Financial stocks fell. ICBC dropped 4% and China Construction Bank plunged 4.9%.

Aluminum Corp of China declined 7.4% on increased power tariffs that are expected to chew into the company’s earnings.